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PwC-Studie "From vision to decision: Pharma 2020" PwC-Studie "From vision to decision: Pharma 2020" Document Transcript

  • Pharma’s future has never looked more promising – or more ominous. Major scientific, technological and socioeconomic changes will revive the industry’s fortunes in another decade, but capitalising on these trends will entail making crucial decisions firstFrom visionto decisionPharma 2020 www.pwc.com/pharma2020
  • ContentsIntroduction 1Chapter 1 The best of times, the worst of times 2Chapter 2 The mature markets: Maximising the molecule 8Chapter 3 The growth markets: Hot, cold, hard to get right 18Chapter 4 R&D: Beautiful hypotheses, ugly facts 24Chapter 5 Portfolio management: Choosing the best jam 32Chapter 6 Corporate culture: Culprit and cure? 38Chapter 7 Conclusion: From vision to decision 42References 43Key national indicators 48Acknowledgements 50Contacts 51
  • Many of the conditions that will determine what happens in 2020 are already in place. But does that mean pharma’s fate is sealed? Far from it!Introduction Major scientific and technological advances, coupled with sociodemographic • Cultural sclerosis The prevailing management culture, changes, increasing demand for medicines mental models and strategies on which and trade liberalisation, will revive the industry relies are the same ones pharma’s fortunes in another 10 years it’s traditionally relied on, even though and deliver dramatic improvements in they’ve been eclipsed by new ways patient care. But if the industry is to of doing business. prosper in the future, it must first make sure it has a future. Of course, many of the conditions that will determine what happens in 2020 We’ve outlined our vision of what lies are already in place. Most, if not all, ahead in previous Pharma 2020 papers. of the products that will be launched The theme of our latest paper is decisions: by then are already in the pipeline. the decisions pharma companies will Similarly, many of the senior executives need to make between now and the who will be at the helm have already end of the decade to capitalise on the been earmarked for high office or opportunities the next decade holds. appointed. And changing the culture of a large organisation can take years. We believe the industry faces three fundamental challenges: But does that mean pharma’s fate is sealed? Far from it! •  ising customer expectations R The commercial environment is getting We believe there are various things harsher. Healthcare payers are companies can do both to increase imposing new cost constraints on their chances of reaching 2020 and to providers and are scrutinising the value ready themselves for more favourable of medicines more carefully. They want conditions thereafter. In the following new therapies that are clinically and pages, we’ll look at how to maximise economically better than the existing the value of new and existing medicines, alternatives, together with hard, develop business models for the growth real-world outcomes data to back any markets, improve scientific productivity claims about a medicine’s superiority. and reinvigorate the corporate culture. We’ll focus on the areas where the most •  oor scientific productivity P important decisions must be made. Pharma’s output has flatlined for the past decade. Yet the processes it uses to discover and develop new products remain much the same. So there’s little reason to think its productivity will suddenly soar. From vision to decision 1
  • The best of times, the Inexpensive gene sequencing will let doctors diagnose and treat patients worst of times based on information about their individual genomes. And, by 2020, genetic testing will be part of mainstream medical practice in some countries. “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was Technological developments have also paved the way for electronic medical the epoch of belief, it was the epoch of incredulity….” record (EMR) systems that capture vast Charles Dickens quantities of outcomes data. Numerous healthcare providers in the mature and growth markets alike are building the necessary infrastructure. Meanwhile, The opening words to Charles Dickens’s with sophisticated data sharing, processing novel A Tale of Two Cities perfectly and mining techniques, scientists can encapsulate the situation pharma easily collaborate and make better sense finds itself in right now. The outlook of what they see. has never seemed more promising – or more ominous. In effect, two changes are taking place concurrently. Our technologies for The best of times collecting biological data are improving Let’s start with the good news: a rapidly by many orders of magnitude. Our strengthening scientific base, growing technologies for synthesising and demand for medicines and the removal analysing that data are also becoming of former impediments to free trade. much cheaper and more efficient. Together, these advances will help A strengthening scientific base pharma break through some of the The scientific foundation on which barriers that have previously held it back pharma rests is improving exponentially, (see box, Big data’s big dividends).3 thanks to massive increases in processing power; advances in genetics and The progress we’ve already made genomics; and new data management in understanding breast cancer is tools. For the last half-century, computers a quintessential example. For many have been doubling in performance years scientists thought breast cancer and capacity every 18 months. This was a single disease. Then, in 1990, revolution has transformed biomedical researchers discovered the first gene research. In 2001, it cost US$95 million to be associated with hereditary breast to read an entire human genome.1 Today, cancer. Now they’ve succeeded in teasing two leading manufacturers are developing apart differences in DNA to identify machines that can do so for as little as 10 subtypes, each with a unique genetic $1,000 – in a matter of hours.2 fingerprint (see Figure 1).42 Pharma 2020
  • Big data’s big dividends One industry marketer recently and query technologies – the industry remarked: “Every patient experience will be able to develop more effective, now generates rivers of data which, if personalised medicines. It will also pooled intelligently, can trace a detailed be able to shift the focus from reaction portrait of a patient’s health and, when to prevention. aggregated with other patient data streams, can coalesce into deep Several companies have already reservoirs of knowledge about entire started exploiting this trend. Genomic disease states and patient populations.” research firm CardioDX analysed more This leap in our knowledge has transformed than 100 million gene samples to identify the prognosis for women with breast That’s the promise of ‘big data’, and the 23 primary predictive genes for cancer. The five-year relative survival rate the deluge is increasing all the time. coronary artery disease. It’s now has soared from 63% in the early 1960s We create about 2.5 million terabytes developed a test that can identify coronary to 90%, and most of the improvement has of data a day. Pervasive monitoring artery disease in its earliest stages. taken place in the last two decades.5 and ‘anywhere interface’ technologies that turn a rigid surface into an interface Meanwhile, US data and lab testing A better understanding of disease has with an electronic device will make it service company Medivo is mining produced new medicines, diagnostics easier still to collect huge quantities laboratory records for patient and and lines of research. Take Benlysta, of data on how patients respond to disease insights. It’s consolidated data one of the first treatments to come from different treatments. Combine that from more than 50 million patients in mapping the human genome and the with ubiquitous gene sequencing and a simple, easy-to-use system that helps first new therapy for lupus in 50 years. the why will begin to emerge. doctors see the patterns in a patient’s The researchers who discovered Benlysta disease, as well as the patient’s trawled through a library of human DNA Big data’s potential in pharmaceutical response to a given treatment. And hunting for genes whose function wasn’t R&D is enormous. Armed with vast Sanofi recently tied up with pharmacy known, but whose characteristics suggested amounts of biological data and the benefits manager Medco Health they were linked to lupus – ignoring the tools to process it – cutting-edge Solutions to get ‘real-world’ insights conventional wisdom that you couldn’t use analytics, streaming, massively parallel into how different therapies compare a gene to find a new medicine without processing and domain-specific access when used in a normal clinical setting. understanding what the gene did.6 Figure 1 Our understanding of breast cancer is being transformed William Halstead realises that breast cancer spreads from a primary tumour and introduces radical mastectomy Investigators discover that tumours fuelled by oestrogen and progesterone behave differently. Herceptin, the first targeted treatment for women Tamoxifen, the first drug to block the activity of with HER2-positive breast cancer, is launched oestrogen, is launched Scientists sequence 42 tumours and identify several different subtypes The human genome is mapped in full 1940-60 1990 1994 2004 2012 20201894 1977 1998 2000 2003 Myraid Genetics DNA testing of isolates BRCA1 tumours reveals 10 different subtypes Mary Claire-King and her Genome Health launches colleagues at Berkeley prove the first genetic test for Researchers establish that 75% of the BRCA1 gene exists women with oestrogen breast cancers are fuelled by oestrogen receptor-positive breast and progesterone cancer Source: PwC From vision to decision 3
  • Figure 2 The global pharmaceutical market could be worth nearly $1.6 trillion by 2020 US$ billions 500 499 425 400 337 300 273 205 194 205 200 183 149 127 100 27 31 0 United States Canada EU-Big 5 Japan Growth ROW markets Sales in 2011 Sales in 2020 Source: Business Monitor International Notes: (1). All sales are expressed in US dollars at constant exchange rates; (2). The growth markets include, in descending order of size, China, Brazil, Russia, India, Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan and Vietnam. (3) EU-Big 5 is France, Germany, Italy, Spain and United Kingdom. Genomics isn’t the only field in which we’ve made great headway. Several stem Working out cell therapies have already reached the our wiring While there’s still a lot more to market and Canadian regulators recently approved the first stem cell medicine learn about the human body, manufactured for off-the-shelf use. Most diseases stem from disturbances in the way the medical researchers have made Developed by Osiris Therapeutics, molecular components in a human Prochymal is a treatment for acute huge strides in the past few graft-versus-host disease, using cell interact, rather than a single genetic abnormality. This years – and even better things mesenchymal stem cells derived from intracellular network is immensely the bone marrow of healthy adult donors.7 lie ahead complex. It has more than 100,000 different components – including With disciplines like epigenetics, we’re about 25,000 protein-encoding also beginning to understand the impact genes, 1,000 metabolites and an as of heritable biological elements that yet unknown number of distinct aren’t directly encoded in our DNA. And proteins and functional RNA with concepts like network medicine, molecules – all of which function we’re developing the means to understand interdependently. the molecular relationships between apparently distinct ‘pathophenotypes’ With network medicine, researchers (see box, Working out our wiring).8 aim to create ‘wiring diagrams’ of the cells whose breakdown causes a So, while there’s still a lot more to particular disease – much as vehicle learn about the human body, medical manufacturers create wiring researchers have made huge strides diagrams of a car’s electronics, so in the past few years – and even better that a mechanic can fix any faults. things lie ahead. By 2020, the financial Such diagrams will ultimately help and intellectual investment of the last pharma develop treatments that can 10 years should be starting to yield ‘fix’ the underlying components of big rewards. disease, as distinct from its symptoms.4 Pharma 2020
  • Escalating demand for medicines eight-year drive to provide universal Poor scientific productivityThat’s not all. The global pharmaceutical coverage.19 And India’s National Take the vexed issue of the industry’smarket is growing steadily, with sales Rural Health Mission has achieved scientific productivity. Although thereaching $1.08 trillion in 2011 – a considerable progress in the 6½ years number of new medicines reaching theyear-on-year increase of 7.8%. The since it was launched, although much market picked up in 2011, pharma’smature economies proved very sluggish, still remains to be done.20 annual output has effectively flatlinedbut the growth economies were another for the past 10 years (see Figure 3).matter. Sales in the BRIC countries In short, there are more people – and(Brazil, China, India and Russia) rose more sick or elderly people – in the world Developing new medicines is becomingby 22.6%, while sales in the other 13 today than ever before. More people an increasingly expensive business, too,growth countries (the ‘fast followers’, have access to affordable healthcare although precisely how expensive is theas we call them) rose by 7.2%.9 than ever before. And, by 2020, access subject of fierce debate. In 2006, the to healthcare may well be regarded Tufts Center for the Study of DrugIf this pattern continues, the market everywhere as a basic human right. Development put average costs perfor medicines could be worth nearly molecule at $1.24-1.32 billion.22 Various$1.6 trillion by 2020 (see Figure 2).10 Trade liberalisation commentators have since challengedIndeed, it could be worth even more. Many of the historical barriers to free these figures, claiming that the real costDemand for pharma’s products is rising trade have also been removed, bringing is anything from $75 million to $4dramatically, as the global population a period of unprecedented growth in billion, although most people leanincreases, ages and becomes more global trade. Between 2001 and 2011, towards the higher end of the range.23sedentary. In 2010, there were an the total value of merchandise exportestimated 6.9 billion people. By 2020, flows (excluding services) soared from Tighter regulationthere will be more than 7.6 billion.11 And, $6.2 trillion to $18.2 trillion in current The regulatory environment isif present trends are any guide, many of US dollars.21 simultaneously getting more rigorous.them will have health problems. The European Medicines Agency (EMA) In some respects, then, pharma’s never recently introduced a new, three-prongedMore than 30% of the population won’t had it so good. The tools to develop approach to the management of adverseget enough physical exercise;12 more than remarkable new medicines are reactions.24 And the Food and Drug20% will be overweight or obese;13 and materialising, demand for its products Administration (FDA) is building anmore than 13% will be 60 or older.14 is escalating and trade is getting easier. active surveillance system called SentinelThese are all factors that increase the risk to oversee the safety of all medicines onof developing heart disease, diabetes and The worst of times the US market.25cancer. The number of people reaching Yet pharma also faces some enormousreally old age is also mounting, and the obstacles. Innovation has declined, theprevalence of dementia doubles every regulations are becoming more onerousfive years after the age of 65.15 Hence the and market conditions are gettingWorld Health Organisation’s prediction harsher, as healthcare costs everywherethat, by 2020, non-communicable keep rising.diseases will account for 44 milliondeaths a year, 15% more than in 2010.16 Figure 3 Pharma’s scientific productivity has flatlined for a full decadeThe global incidence of infectiousdiseases is increasing as well. That’s partly Number of products approvedbecause some diseases have becomedrug-resistant. But over the past few 40decades new pathogens such as HIV and 35 7MRSA have emerged. And old scourges 30 6like pertussis have reared their heads 8 14 11 10 15again. In fact, the number of cases of 25 11 10pertussis in the US is now higher than 20 9 10 11at any time since the early 1970s.17 15Meanwhile, many of the growth economies 10are improving access to healthcare. 5Brazil’s introducing mobile clinics for 27 24 17 21 31 18 18 16 21 19 15 24 0rural communities.18 China’s on track 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011with a US$125 billion programme toextend health insurance cover to more New molecular entities Biologicsthan 90% of the population by the end Source: EvaluatePharma, ‘World Preview 2018’ (June 2012)of 2012. Mexico has just completed an From vision to decision 5
  • Regulators around the globe are also Some instances? Russia started enforcing The market’s getting much collaborating more closely, so a product mark-up limits on imported medicines in that’s rejected in one region is more April 2010.28 India announced plans to tougher, with tighter likely to be rejected in others. In late control the prices of 400 essential regulation, harsher price 2010, for example, the EMA pulled products in November 2011.29 And diabetes drug Avandia, while the FDA Turkey has upped the discount on controls and greater imposed strict restrictions on its use, and treatments reimbursed through its social government scrutiny, all the two agencies swapped notes before security system.30 reaching a decision.26 trends that will grow Many governments are also clamping More difficult market conditions down on dubious promotional practices. Things are even tougher on the The US authorities have been marketing and sales front. The ‘patent particularly active. Between 2000 and cliff’ is one major factor; between 2012 mid-2012, the industry paid more than and 2018, generic erosion will wipe $30 billion to settle 226 violations, about $148 billion off pharma’s revenues including off-label marketing and (see Figure 4). Harsher price controls are overcharging of taxpayer-funded health another. Most of the mature economies programmes like Medicaid – and the already use direct and indirect price penalties have been steadily escalating controls, as we noted in ‘Pharma 2020: (see Figure 5).31 Taxing times ahead’.27 But conditions are getting more difficult in the growth The US is by no means alone, though; economies as well. 24 countries have now introduced laws or codes of conduct requiring that pharma companies disclose any interactions with Figure 4 Big Pharma’s earnings are tumbling over the patent cliff healthcare professionals who are also customers.32 And a recent analysis of the Securities and Exchange filings made by Expected sales losses (US$ billions) the top companies shows that eight face 35 33 charges of corruption in foreign markets.33 30 25 21 21 20 19 19 18 17 15 10 5 0 2012 2013 2014 2015 2016 2017 2018 Sources: EvaluatePharma, ‘World Preview 2018’ (June 2012) Note: Estimate of losses based on top 500 pharmaceutical and biotech companies.6 Pharma 2020
  • As the governments of the growth Figure 5 Pharma’s incurring bigger and more frequent financial penalties in the USeconomies invest more public funds inhealthcare, the regulators become moreproactive and patients become more Number of settlements Total penalties (US$ millions)demanding, pharma will come under 50 8,000even closer scrutiny. The way it conducts 7,000clinical trials, the partnerships it forms 40 6,000with payers and providers, its tenderingand contracting strategies, pricing 30 5,000agreements and digital marketing, how 4,000it handles patient safety – all will attract 20 3,000more attention. 2,000 10Soaring healthcare costs 1,000Yet, serious as these issues are, there’s 0 0arguably an even bigger hurdle facing 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012pharma: namely, the rising healthcarebill. Healthcare expenditure as a Settlements Financial penaltiespercentage of gross domestic product Source: Public Citizen(GDP) is climbing in countries in every Note: Figures for 2012 cover period up to 18 July 2012.income bracket, and it’s climbing moststeeply in the mature markets where theindustry has historically made most of its Figure 6 Healthcare’s consuming a larger share of GDP in rich and poor countries alikemoney (see Figure 6).This trend is unsustainable, but the only Healthcare expenditure as % GDPway to reverse it is by altering our 16 15.5concept of healthcare itself. Instead of 14 13.9focusing on the treatment of disease, we 12.7 12need to focus on curing – or, better still, 10.9 9.6 10.1preventing – it. And pharma has a crucial 10role to play in making the transition. 8 6.2 5.7 5.9 6 5.4 5.4Two key challenges 5.0 5.3 5.9 6.2So where does the industry now stand? 4 4.1 4.0 4.8It’s proved remarkably resilient, given 2the many problems it’s dealing with. 0But, in essence, it faces two overarching 1995 2000 2005 2010 2015E 2020Echallenges. Tomorrow’s challenge is todevelop new medicines that can prevent High income Middle income Low incomeor cure currently incurable diseases. Source: World Bank and PwC analysisToday’s challenge is to get to tomorrow– and that’s a tall order in itself.Fortunately, there are a number of stepssenior executives can take to help theircompanies reach 2020 and ready themfor the opportunities the next decadebrings. But some of these steps will entailmaking very difficult decisions. From vision to decision 7
  • The mature markets: Crushing burdens Financial pressures have played a part Maximising the molecule in hardening healthcare payers’ policies. The mature markets have experienced enormous turmoil in the past five years – and though fiscal stimuli have “A thing is worth only as much as it can be sold for.” produced a fragile recovery in the Publilius Syrus strongest economies, the situation is still dire in the GIIPS countries (see Pharmageddon? on page 16). Crushing demographic and epidemiological factors have compounded these economic woes. More than There are big differences within the three-quarters of all Americans are mature markets and over the past few overweight or obese. Obesity is also a big years the differences have been growing. problem in the rest of the mature markets, In this chapter we’ll focus on pharma’s with the exception of Japan. But Japan prospects in Canada, France, Germany, has other troubles; by 2020, 34% of the Japan, the UK and US, and the decisions population will be 60 or older. (See involved in maximising returns in these our list of key national indicators on markets. We’ll also touch on the situation page 48.) in Greece, Ireland, Italy, Portugal and Spain (the GIIPS economies), where the Age and obesity are both associated with issue is not so much how to increase more illness and, sure enough, the sales as how to reconcile conflicting prevalence of diseases like diabetes has ethical and commercial responsibilities. soared.34 The US has been hit especially hard. Some 11.3% of adults – rising to Collectively, Canada, France, Germany, 26.9% of those aged 65-plus – have Japan, the UK and US still generate 59% diabetes. Another 35% – rising to 50% of of the industry’s total revenues (see those aged 65-plus – have prediabetes.35 Figure 1). But they’re becoming more In fact, diabetes now accounts for about difficult places in which to prosper for one in every 10 healthcare dollars.36 one key reason. They’re all demanding But the US isn’t alone. The prevalence better outcomes as a precondition for of diabetes has been creeping up in paying for new medicines – a change we Europe, too.37 expect to result in new regulatory requirements by 2020.8 Pharma 2020
  • Consumer power is increasing the Affordable care and its The law also encourages healthcarechallenge. Patients in the mature implications professionals to band together ineconomies have higher expectations than Consider the recent healthcare reforms in accountable care organisations (ACOs)ever before. They want medicines for the US. The Affordable Care Act aims to to deliver better, more coordinatedconditions previous generations simply improve access to healthcare by bringing care, help prevent disease and reduceendured. They want medicines that work another 30 million citizens within the unnecessary hospital admissions. Thosefor them. And they only have to turn to insurance net.40 It also aims, among that offer a superior service and cut coststhe Internet to find out what’s available other things, to reduce out-of-pocket will be allowed to keep some of the– or, indeed, to broadcast their opinions: expenses on pharmaceuticals, which money they’ve saved – an incentive that’s16% of US adults in one recent survey should enhance patient compliance. generated considerable interest. To date,said they post reviews of the treatments 65 ACOs have been set up and thethey take on social media sites.38 The act includes various provisions number’s expected to double over the intended to offset the cost of the coming 12 months.42These financial, demographic and social changes, some of which will fallpressures are driving up healthcare on pharma’s shoulders. We estimate These changes will inevitably exposeexpenditure dramatically. So it’s easy to that these provisions will reduce the medicines to much greater scrutiny.see why healthcare payers and providers industry’s revenues from branded When healthcare providers are paid forin the mature countries are doing all medicines by $112 billion over the the value they create, they’ll apply thethey can to curb the bill. Their resources next decade (excluding the effect of same criterion to the therapies theyare finite – and they’re particularly keen introducing a biosimilars pathway). prescribe. In fact, they’re already startingto address the so-called HONDAs Assuming a modest increase in sales to do so. Four-fifths of the US health(Hypertensive, Obese, Non-compliant, from expanded insurance coverage, insurers we polled in a recent survey nowDiabetic Asthmatics) who account for an the net loss will be about $97 billion.41 require evidence of cost savings or a clearestimated 70% of healthcare costs.39 clinical benefit to include new products But the new law has far wider in their formularies. 16% have also ramifications – and the biggest of all, entered into outcomes-based contracts perhaps, is value-based purchasing. with pharma companies, while another From 2013, all hospitals serving 33% expect to do so within three years.43 Medicare patients with the most common conditions will be paid for the quality of So the Affordable Care Act will have the care, rather than the quantity of a huge impact on pharma. Historically, services, they supply. The same concept drugmakers have sold their products will be extended to other healthcare by the unit at prices they themselves providers over the next few years. have set, with discounts for volume buyers. But with the shift from unit pricing to value-based purchasing, it’sFigure 1  markets generate three-fifths of pharma’s revenues from prescription Six what customers think – not what the products manufacturer thinks – that matters most. New products will be priced on the basis Percentage of sales in 2011 of the value buyers accord them. And the pharma company’s relationship with the healthcare community won’t stop when the deal’s signed; it will continue for the United States 31 duration of the patient’s treatment. ROW 41 12 Japan 2 4 5 5 Canada United Kingdom Germany FranceSource: Business Monitor International From vision to decision 9
  • Tough talk in the EU, Above all, the mature economies are Pharma’s biologics bet Canada and Japan encouraging generic prescribing – and But what’s pharma been doing? It’s been The other mature economies have also some have been doing so for many years. concentrating on biologics for cancer been reforming their healthcare systems, Indeed, as of 2009, the French social and rare diseases. Nearly 30% of the as we predicted in ‘Pharma 2020: The health insurance system even offers 7,891 molecules currently in clinical vision’. And, like the US, they’re taking doctors individual guidance on rational testing cover cancer and autoimmune a much harder stance. prescribing.50 Such initiatives have had conditions.52 An estimated 460 a pronounced effect on prescribing medicines for rare disorders are also in In 2010, the German Bundestag passed patterns. Generic spending in the mature trials, although there’s some overlap the AMNOG health bill, under which all markets is forecast to rise by $35-40 between the two areas (see Figure 2).53 new therapies must be independently billion over the next five years, with 60% assessed against a comparator within of the increase coming from greater Most such treatments cost far more than 12 months of reaching the market and utilisation of existing generics.51 chemical molecules. In the UK, for priced in line with the improvement example, the average price of a biologic they offer.44 The UK will also introduce So the message healthcare payers in the is about £9,500 ($14,750) per patient compulsory, value-based pricing of all mature markets are sending out is loud per year, compared with £450 ($700) for new drugs in 2014.45 Both these systems and clear: give us new medicines that are a conventional therapy.54 Prices are even mark a major departure from previous clinically and economically better than higher in the US and some products for practice; in the past, economic what’s already available – medicines that rare diseases cost hundreds of thousands evaluation of medicines in the EU has decrease mortality or morbidity, make of dollars. been used to determine whether to the care pathway more efficient or reimburse them – not to set prices. reduce the total resources a patient consumes. And give us hard, real-world Meanwhile, health researchers in data to back up your claims. Canada are investigating the idea of a pan-national body to negotiate drug prices, thereby reducing the inequities Figure 2 There are 460 therapies for rare diseases in the pipeline between provinces with more and less buying power. They’re also examining the feasibility of performing real-time Number of drugs evaluations of medicines.46 Autoimmune disorders 18 Blood disorders 12 Japan is exploring yet other options, Cancer 107 including the expansion of its scheme for re-pricing medicines whose sales Cancer-related conditions 10 are much higher than expected.47 Cancer, blood 79 It also imposed a 1.26% cut in prices Cancer, skin 31 (using total healthcare expenditure Cardiovascular diseases 6 as its base) in April 2012.48 And the Eye disorders 11 Ministry of Health, Labour and Welfare Gastrointestinal disorders 10 is considering whether to introduce health technology assessments.49 Genetic disorders 67 Growth disorders 5 Further changes are afoot. Several Infectious diseases 31 countries have introduced fixed, Neurological disorders 37 all-inclusive hospital tariffs for the Respiratory disorders 14 treatment of specific diseases, with Transplantation 20 penalties for emergency re-admissions. And many healthcare payers are looking Other 37 for opportunities to reduce costs by 0 20 40 60 80 100 120 moving the point of care from the hospital to the doctor’s office or patient’s home. Source: PhRMA10 Pharma 2020
  • The value dilemma Figure 3 Pharma has an additional lever in the form of outcomes dataIn short, the mature markets have beenevolving economically, demographicallyand structurally, but pharma hasn’t kept Outcomes impactabreast of the changes. It’s continuedto pursue its old ‘get more, pay more’approach, even though the mature Marketing and salesmarkets are running out of money and R&D Patentsome of the medicines it’s developed productivity extension Costsarguably provide little extra value. $0What healthcare payers want, bycontrast, is more value for the samemoney or the same value for less. Andthey can afford to play a waiting game. R&D (12-13 years) Marketing and sales (7-8 years)As a growing number of treatments comeoff patent, they’ll soon be able to buy thesame medicines at lower prices anyway. Source: PwCSo pharma’s contributed to the position The outcomes lever marketing and sales. Rather thanin which it finds itself. And any company There are other implications, too. In the focusing on commercial potential, forthat wants to reach 2020 will either have past, pharma had four ‘profit’ levers: example, the R&D function will have toto offer more value without charging R&D productivity, cost cutting, marketing focus on creating value for customersmore or prove unequivocally that it can and extension of the period of market when it decides which medicines toremove costs from another part of the exclusivity. Most businesses relied progress through the pipeline. It will alsohealthcare system to make room for the mainly on marketing, but this lever has have to collect proof of that value, usinghigher prices it’s charging. become much less effective now that real-world outcomes data. payers and providers scrutinise outcomesMoreover, since many of the medicines so carefully. No matter how many sales Similarly, rather than using unit pricesin the industry’s pipeline went into reps a company fields or how many and sales volumes to produce budgetsdevelopment before these market forces samples it hands out, if a new treatment and forecasts, the health economicswere so strong, some products may be doesn’t offer more value than competing function will have to use outcomes-basedincapable of meeting healthcare payers’ therapies, healthcare payers in the modelling and make sure that investorsexpectations. It takes at least a decade to mature markets simply won’t buy it. understand the approach it’s adopting.develop a new drug and only six months It will also have to set up systems capableto change a clinical pathway. A lot of That said, the industry now has another of managing an intricate network ofcompanies may thus have to slash their lever in the form of outcomes data. contingency payments and rebates.portfolios at very short notice. Instead of ‘creating awareness’, it can demonstrate the worth of its products The marketing and sales function will with real-world evidence of lower have to make even bigger adjustments. mortality and morbidity rates or savings It will have to grapple with rigorous in total healthcare costs (see Figure 3). scientific data and complex economic studies, as well as developing the skills But pulling the ‘outcomes lever’ will to negotiate with healthcare payers require major changes, and three equipped to perform their own functions will be particularly deeply sophisticated analyses. affected: R&D, health economics and From vision to decision 11
  • Maximising the molecule So what, more specifically, can pharma Reinforcing the power of the pill companies do to ‘maximise the molecule’? We’ll look at four ways to create more With ingestible microchips embedded now incorporated the game into value for customers: plugging ‘leaks’ in drugs, doctors will soon be able to physiotherapy programmes. in the healthcare system; collecting tell whether patients are taking their real-world evidence of a medicine’s medicines as prescribed. Proteus But other companies have used the effectiveness; measuring how patients Digital Health’s chips are one of same idea. HopeLab has launched feel; and developing companion several new technologies that aim a video game designed to foster a diagnostics for specialist therapies. to improve compliance. Other devices positive attitude in young cancer in the pipeline include implants that sufferers. Players can use a variety of Plug leaks in the wirelessly inject drugs at pre-specified ‘weapons’ to zap malignant cells, with healthcare system times and sensors that send a patient’s 20 levels each providing information Since healthcare payers want better electrocardiogram to a smart phone. about different treatments and the clinical and economic outcomes, one importance of adhering to them. Bayer logical place to start is by analysing the Mobile health applications also hold has also created a blood glucose care pathway to identify where the huge promise. mHealth apps store monitoring system that can be plugged outcomes from existing treatments Happtique has, for example, launched into a Nintendo. Didget aims to teach are impaired. Our research shows that, a pilot programme that lets doctors children with diabetes how to manage in the US alone, roughly $210 billion prescribe apps as part of an overall their disease by rewarding them for a year is wasted on overuse or misuse healthcare package. mHealth will testing themselves regularly with new of medicines and procedures. Care for revolutionise healthcare in at least two scenarios and characters. conditions that could be corrected respects. It will encourage patients to through lifestyle changes costs another take responsibility for their own health Health video games merge the worlds $303-493 billion a year.55 and provide a means of measuring key of healthcare and entertainment. More health parameters in a comprehensive, sophisticated biomonitoring devices The first step is to map out the different continuous fashion. and mHealth apps will produce further stages in the pathway for a given disease convergence. Fast-forward and – from the stage at which the patient is Remote monitoring devices and biosensors will eventually be able to at risk to the stage at which the disease mHealth will eliminate some of the record everything we eat and drink, is no longer controllable through obstacles to non-compliance. The as well as the amount of exercise we medication. The next step is to find the ‘gamification’ of healthcare has a take. They’ll track the number of places in the care pathway where value different end: encouraging people to calories we consume, remind us to is lost, because of the patient’s behaviour lead a healthier lifestyle by making it go to the gym and warn us when we or failings in the healthcare system. fun. Nintendo’s Wii Fit video game is open the refrigerator for that diet- Many of these leaks occur at transition probably the best-known example of blowing snack. points in the care pathway, where there’s this approach. Several hospitals have unnecessary duplication and waste. Once a company has pinpointed the leaks, it can identify the sort of interventions that might help and where they’re required. This might include screening for a disease while it’s still in the asymptomatic stage, offering dietary advice, reducing a drug’s dosing frequency, providing reminders or, indeed, many other things (see box, Reinforcing the power of the pill).5612 Pharma 2020
  • A number of medical technology firms pharma’s walls. EMRs, electronic But capturing patient-reported outcomesare already exploring new ways of prescribing data, patient compliance in clinical trials requires a lot of upfrontcreating added value, as we noted in data and the like are important pieces planning, particularly when new‘Owning the disease’.57 A few pharma of the jigsaw puzzle. measurement tools must be developedcompanies have started doing likewise. and validated first. So it’s essential toIn June 2010, for example, Pfizer The industry will also have to convince start early in the process. It’s alsolaunched a vascular health check service healthcare payers of the reliability of its important to capture the patientin British pharmacies.58 Similarly, data and that could be an uphill struggle. perspective from as many sources asGlaxoSmithKline (GSK) has linked up Only 5% of the US health insurers we possible. Social media can be a richwith specialist technology provider recently surveyed are very confident of source of information here – and theMedTrust Online to offer an iPhone the quality of the economic data pharma number of people using such outlets willapp that lets US oncologists search companies provide, and only 7% are very only increase. In the US, for example,for clinical trials by cancer type and confident of the quality of the information 83% of Internet users aged 18-29 useautomatically identifies the trial centres they receive on a drug’s comparative social networking sites, compared withnearest their patients.59 effectiveness.61 just 33% of those aged 65-plus.64Meanwhile, Boehringer Ingelheim is There are several things the industry Online patient groups and blogs providepiloting a digital health management can do to foster trust. For instance, an opportunity to listen to patientsservice for patients with diabetes. It it can sponsor independent research talking openly about their experiences.combines a personalised action plan on the cost-effectiveness of its products Several firms have already set upand digital coaching with wireless or get independent verification of its disease-specific communities and sellmonitoring to measure the impact of data. It can also agree on a set of the insights they collect. With newbehavioural changes.60 But many more common measures for assessing clinical technologies for processing naturalopportunities for stopping the leaks and and economic value to reduce the language and analysing unstructuredenhancing outcomes exist. administrative burden on its customers. data, it’s also getting easier for pharma companies to monitor the digitalCollect real-world evidence Measure the feel factor grapevine themselves.of value It’s not just clinical and economicWe’ve talked about maximising outcomes that count, though. Nearly That said, it’s imperative the industrymolecules that are already on the market. a third of the quality measures initially secure proper patient consent and treatWhat about those that are still in the used for value-based purchasing of all such data responsibly. Privacy andpipeline? With value-based purchasing, healthcare services in the US rest on security violations can cause seriousit’s imperative to collect the sort of patient satisfaction.62 So healthcare reputational damage, in addition toinformation healthcare payers want – providers will have to take account of other problems like the loss of vitaland traditional randomised controlled how patients feel. clinical data. Yet our research shows thattrials don’t capture that data. They’re nearly three-quarters of US healthcaredesigned to measure the safety and The number of pharma companies organisations (including pharmaefficacy of a new medicine in carefully that measure the patient experience companies) use health data for secondarymanaged conditions, not how well it is still very small. But Incyte’s recent purposes other than those for which itworks in the real world. use of patient-reported outcomes with was collected, and less than half have myelofibrosis drug Jakafi shows just how put robust safeguards in place.65We’ll discuss the sort of trials that provide valuable a tool it can be. The FDA statedevidence of a medicine’s economic value that it was a vital element in the decisionin more detail in chapter 4. But, among to approve Jakafi and, unusually, letother things, they entail setting up a the company include information aboutreal-world data infrastructure. Most symptom relief on the packaging.companies will have to collaborate with Incyte’s efforts have been recognisedother organisations to do this, since in the marketplace, too. Jakafi sells formuch of the information that’s needed to $84,000 a year in the US – compareddevelop medicines with a better clinical with the $40,000-60,000 it wasand economic profile lies outside originally expected to fetch.63 From vision to decision 13
  • Creating companion diagnostics for medicines that target a specific disease subtype lets doctors maximise the value of those medicines themselves Develop companion diagnostics The FDA has also signalled that it would for specialist medicines like to see more specialist medicines Another way companies can maximise paired with companion diagnostics and the molecules they’re developing is to sometimes accelerates the review create companion diagnostics that let process for such products. But when the doctors maximise the value of those ‘carrot’ doesn’t work, it’s ready to wield molecules themselves. There’s no point the stick. In 2010, the agency refused to in prescribing therapies that target one approve leukaemia treatment Omapro disease subtype for patients who suffer without a diagnostic to identify the from another, as healthcare payers target patient base.66 recognise. And they’re prepared to reward innovations that help them direct NICE rejected melanoma therapy Yervoy precious resources more effectively. for reimbursement on the same grounds (see Table 1). in 2011.67 So failing to develop a diagnostic test for a costly treatment that’s aimed at a tiny patient population Table 1  Targeted medicines with companion diagnostics generate high revenues may damage its prospects of commercial because they work so well for specific patient segments success. Indeed, we think that, by 2020, companion diagnostics will be mandatory Population for approval of all such medicines. Annualised testing positive cost per for biomarker Projected sales Product Indication patient in US Biomarker (%) (2012-2018) Erbitux Colorectal, head $84,000 EGFR+ 37.5 $13.42 billion & neck cancer KRAS-wt Herceptin + Breast cancer $124,800 HER-2+ 25 $49.96 billion Perjeta Tarceva Non-small cell $52,800 EGFR+ 10-15 $10.8 billion lung cancer Xalkori Non-small cell $115,200 ALK+ 4-7 $4.76 billion lung cancer Zelboraf Melanoma $112,800 BRAF+ 13.5 $4.25 billion Sources: EvaluatePharma and The Pink Sheet Note: Projected sales are cumulative and global.14 Pharma 2020
  • What’s it worth? Maximising the molecule will involve To sum up, the message healthcare major decisions about which diseases payers in the mature markets are sending to concentrate on, which medicines to is clear: they want more value for their pursue, what data to collect and how money, they’re measuring the value best to plug leaks in the healthcare they get more carefully and they’re not system. The vast majority of companies prepared to pay thousands of dollars for will also need to revise their budgeting medicines that offer only incremental and forecasting processes, billing and improvements in outcomes. Their payment systems and the way they go pockets aren’t deep enough. to market. But what healthcare payers mean by Most importantly of all, they’ll need to ‘value’ is also becoming clearer, as the keep the big picture in mind at all times.Healthcare payers in the Treatments that prevent disease, cure pricing and reimbursement processesmature markets want more they use become more transparent. otherwise incurable diseases, reduce the And the scope for helping them make overall use of resources and let patientsvalue for their money and stay as productive as possible for as long savings is huge. Thus far, pharma’sthey’re measuring the value focused on the roughly 15% of the as possible: these are the sort of health budget that goes on medicines.68 medicines governments and healththey get much more carefully insurers in the mature markets will buy. That leaves another 85% from which it can generate revenues by reducing consumption of more costly medical And, in the end, as the Roman writer services. If it succeeds in doing this – and Publilius Syrus once noted, “A thing is in surmounting sociopolitical opposition worth only as much as it can be sold for.” to the rebalancing of the mix – we think So it’s what payers, providers and its share of healthcare expenditure in patients value that will determine the the mature economies could rise to 20% value pharma creates for its shareholders. by 2020. From vision to decision 15
  • Pharmageddon? Tighter economic governance The financial problems in the GIIPS Under EU law, national governments are economies have already had a significant responsible for setting health policy and impact on pharma. The European organising and financing healthcare, so Federation of Pharmaceutical Industries the EU’s health initiatives are generally and Associations (EFPIA) estimates that confined to promoting cross-border price cuts and discounts in all five cooperation and setting health and markets reduced the industry’s revenues safety standards. But, with strict fiscal by more than €7 billion ($8.8 billion) in rules enshrined in the EU treaties and 2010 and 2011. But, with other countries European Fiscal Compact, as well as demanding similar discounts, the stringent bailout terms for the member indirect cost was much higher.69 states that have accepted help from the EU and International Monetary Fund The next few years also look bleak. (IMF), EU economic governance poses The governments of the GIIPS states are an increasingly important constraint tightening their budgets, and expenditure on healthcare. on healthcare – including prescription medicines – is a prime target. Opposition Portugal, for example, is currently from the voting public, industry implementing the terms of an EU/IMF advocates and subnational governments rescue package under which the in some countries may temper these government is required to enact efforts. Even so, pharmaceutical sales in legislation to rationalise the use of the five GIIPS economies are expected to health services and reduce overall public fall to $65.4 billion by 2020, down from spending on medicines. So it’s likely to $81.3 billion in 2011 (see Figure 1). issue new cost-saving provisions. One option is to halve the prices of drugs whose patents expire.70 The next annual review of drug prices, due in early 2013, may well bring additional cuts. Figure 1 By 2020, pharma’s revenues will be lower in four of the five GIIPS markets US$ billions 40 34.6 35 30 29.0 28.0 25 19.2 20 15 9.3 10 8.5 6.2 5.1 5 3.2 3.6 0 Greece Ireland Italy Portugal Spain Sales in 2011 Projected sales in 2020 Source: Business Monitor International Note: All sales are expressed in US dollars at constant exchange rates.16 Pharma 2020
  • The Greek government has also initiated The Italian and Spanish governments are Pharma’s efforts to curb the practicevarious healthcare reforms, including both at loggerheads with the regional have been repeatedly stymied, evena restrictive reimbursement list, under administrations, which manage most though most studies show that it’s theits two EU/IMF Memorandums of public healthcare spending. In Italy, this middlemen – not healthcare payers –Understanding.71 Other cost-saving is partly because the Cabinet hopes to who benefit most. But resistance maymeasures may involve the promotion of conclude a health pact with the country’s finally be softening. In May 2012, thegenerics. In March 2012, for example, regional governments in mid-November European Commission launched anthe Italian government passed a that will probably reduce the amount of investigation into the parallel trade of‘liberalisation’ law strengthening the money transferred to them.78 The pharmaceuticals. It’s reported to berules on the use of generic alternatives.72 Cabinet will also set new standard cost considering whether the industry isAnd, in July 2012, the Irish Minister for measurements to allow for more efficient justified in arguing for differential pricingHealth introduced a draft bill permitting healthcare budgeting and lay out a of drugs bought for re-exportation.85automatic generic substitution which, timeline for adoption by the end ofif passed, could cut the country’s 2012.79 Its recent spending review A tightrope to walkexpenditure on medicines by €50 billion includes other measures to limit public The key issue pharma companies tradinga year.73 spending on medicines and medical in the GIIPS economies face, then, is how devices, force suppliers to return part best to balance the needs of patientsMounting debts of their compensation when hospitals with their own commercial imperatives.Price cuts and generic erosion aren’t the run over budget and impose deeper That entails making some hard decisionsindustry’s only grounds for concern, discounts on pharmaceuticals.80 about whether to impose more rigorousthough. Ireland apart, all the GIIPS payment terms, whether to restrict thecountries have deferred payment of their Patients will be expected to pick up a products they supply and whether tomedicines bills, with an estimated bigger share of their medical expenses serve patients via different channels,€12-15 billion owing by the end of 2011.74 in the coming years, too. Italy and thereby giving patients access to the Spain are both trying to reduce costs treatments they require without goingThe problem started in Greece, where by shifting more of the burden of through bankrupt public hospitals.the hospitals racked up debts of about pharmaceutical expenditure to private€7 billion in the latter part of the last payers. For example, the Spanish Health It also entails coping with considerabledecade. Many of those bills remain Ministry recently eliminated over 400 uncertainty. As the Eurozone crisisunpaid, and the Greek government drugs from its reimbursement lists.81 unfolds, prolonged austerity and marketrecently passed a law stipulating that And, in April 2012, it introduced pressure may contribute to publicif the country exceeded its annual co-payments on medicines for pensioners, discontent and political instability.medicines budget, the industry would be as well as raising co-payments for Changes in government in the GIIPSrequired to pay for any overspending.75 everyone in the workforce, with countries and elsewhere haven’t increases tied to income levels.82 generally resulted in the reversal ofThe contagion subsequently spread austerity measures and structural reformto Italy, Portugal and Spain. Grey trading policies thus far. But it remains to beMacroeconomics research group The financial plight of the GIIPS seen whether voters will continue toPrometeia reports that Italy’s local health economies has had one last change of tolerate austerity in the longer term.authorities took an average 262 days to particular significance for pharma: thepay their medicines bills in 2011, while increase in re-exportation of medicinespayment delays in Portugal rose from from lower- priced to higher-priced375 days to 453 days.76 The Spanish countries. In 2009, the ‘grey’ market forhealth system was in an even worse prescription drugs in Europe was worthposition until June 2012, when the about €5.2 billion a year (at ex-factorygovernment set aside €17 billion to cover prices).83 But EFPIA reports that there’srising debts in the autonomous regions.77 been a marked rise in parallel trading in recent months.84 From vision to decision 17
  • The growth markets: Hot and cold at the same time Hot, cold, hard to get right The growth markets are as hot as boiling water, but they can also be as cold as ice. On the one hand, they’re expanding rapidly. By 2020, the BRIC economies “If a man has one foot in a bucket of ice and the other alone will account for 33% of the world’s in a bucket of boiling water, he is, on the average, GDP, measured in terms of purchasing power parity (PPP) – up from 25% very comfortable.” in 2009.86 Mark Twain On the other hand, the growth markets come with some enormous challenges, including their geographic size, cultural diversity, underdeveloped infrastructure, fragmented distribution systems and Figure 1 Demand for medicines is rising rapidly in the growth markets weak regulations that are often ineffectively enforced. Average incomes are also much lower than they are in the US$ billions developed world. 200 175.8 172.2 So the growth markets have great 175 commercial potential, but they could 150 take as long as 20 years to catch up 125 with the mature markets. And, in the meantime, doing business in these 100 countries carries a lot of risks for the 76.6 75 66.9 inexperienced or unwary. 57.3 45.1 48.8 50 25.6 A foot in each bucket 25 20.7 15.6 Pharma’s prospects reflect this 0 dichotomy. On the upside, expenditure China Brazil Russia India Fast followers on medicines is rising far faster in the Sales in 2011 Projected sales in 2020 growth economies than it is elsewhere. In aggregate, it could reach $499 billion Source: Business Monitor International a year by 2020 – up from $205 billion in Notes: (1) All sales are expressed in US dollars at constant exchange rates; (2) The fast followers include Argentina, Egypt, Indonesia, Mexico, Pakistan, Poland, Romania, South Africa, Thailand, Turkey, Ukraine, 2011 – as economic expansion and better Venezuela and Vietnam. access to healthcare drive up demand (see Figure 1). On the downside, serving the growth markets is very difficult, both because of their intrinsic problems and because they vary so much. They differ politically, geographically, religiously,18 Pharma 2020
  • socially and structurally. They differ in Figure 2 The middle class is expandingterms of the treatments they need, sinceethnic origin, diet and environment playa huge part in determining the particular Percentage of population with income of $6,000-30,000 (PPP)disease subtypes from which people 100suffer. And they differ in their ability and 84willingness to pay for new medicines. 79 80 75 71 70 65There are pockets of great wealth, 59 61 60 56 57and the overall level of affluence is 51increasing. The number of ‘middle-class’ 46 46 37 39consumers – defined as those with 40annual incomes of between $6,000 and$30,000 (PPP) – is forecast to rise from 20 161.7 billion to 3.6 billion by 2025 (see 6 7Figure 2).87 0 Brazil Russia India China Egypt Indonesia Mexico Turkey VietnamBut patients in the growth economies 2009 2025typically have to fund a larger share oftheir own healthcare costs than patients Source: Goldman Sachsin the mature economies. And even Note: In Russia and Turkey, the percentage of the population falling within these parameters is declining as more people move into higher-income groups.in the BRIC countries, where the rateof expansion is fastest, per capitaexpenditure on healthcare is far too low Table 1 Patients in the growth markets can’t afford costly biologicsto support biologics priced at manythousands of dollars (see Table 1). Private share of healthcare Per capita health spending, Population with net assets ofIn fact, reconciling the healthcare needs expenditure (%) 2010, US$ US$10,000 or less (%)of the rich and poor is one of the biggest Brazil 53.0 990 62.1challenges the governments of the China 46.4 221 66.4growth economies face. They must India 70.8 54 92.8juggle rising demand for higher-value Russia 37.9 525 75.4medicines from wealthy citizens withcalls for better access to essential Sources: World Bank Indicators and Credit Suisse, Global Wealth Databook (October 2010)medicines from those in the lowersocioeconomic strata – a delicatepolitical balancing act that will probably Similarly, Mexico’s President Enrique privately run hospitals, including theprove a mixed blessing for pharma. Peña Nieto is expected to push through removal of certain barriers to foreign fiscal reforms that could involve investment, suggest that it’s willing toFor instance, the Brazilian government reworking various tax exemptions, increase the overall presence of therecently acted on concerns about slowing including the current exemption from private sector in the healthcare space.91economic growth by exempting a value added tax on food and medicines.90number of industries, including pharma, But he may well make the move more This could bode well for foreignfrom payroll tax.88 But it simultaneously politically palatable by routing some of companies in related industries,imposed tariff hikes on 100 products, the revenue it generates into the national including pharma. But implementingsome of which will affect pharmaceutical health insurance programme. the changes at local level will be veryinputs, to protect domestic industries from difficult. And, as in Brazil, there arecheaper imports. So pharma companies Meanwhile, in China, where the one-child concerns about declining growth.operating in Brazil will benefit from policy has accelerated the aging curve, If China’s economy continues to slowsignificantly lower labour costs while healthcare reform has become a pillar of down, some of the more ambitiousincurring higher import fees.89 the central government’s 12th Five-Year and expensive components of Beijing’s Plan. And Beijing’s recent efforts to healthcare reform could be derailed. improve the regulatory environment for From vision to decision 19
  • Figure 3  Patented medicines will play a small role in driving up pharmaceutical sales So the growth countries currently in the growth markets lack the financial power to reward innovation. Near-term economic US$ billions uncertainties are also likely to render Brazil 8.8 15.3 progress in reforming their healthcare systems uneven. Hence the fact that China 30.0 60.2 most of the projected increase in India 3.3 24.2 pharmaceutical sales over the next Russia 3.9 10.9 decade is expected to come from 20 40 60 80 100 generics rather than patented products 0 (see Figure 3). Additional spending on patented products (2020) Additional spending on generics (2020) Source: Business Monitor International That, in turn, means pharma can’t rely Note: All sales are expressed in US dollars at constant exchange rates. on its usual methods for making a profit in mature countries. It needs to adopt a totally different strategy – or, rather, different strategies for each market, since they vary so greatly. Figure 4 Big pharma’s using four strategies in the growth markets Value or volume? How, then, have the industry majors responded to date? Our analysis indicates that they’ve adopted one of Innovation-driven Market-driven four policies (see Figure 4). Those at the innovation-driven end of the spectrum Sell full proprietary Sell limited range of Build market Expand aggressively have focused on quality rather than portfolio, including proprietary products, presence with with small molecules, biologics, at high at high prices selective local generics and local quantity. Roche is a case in point. In prices investments formulations, using 2010, Pascal Soriot, former chief differential pricing operating officer of Roche’s pharma division, stated that it aimed ‘to sell Source: PwC innovative, higher priced products’ to the growth markets – a strategy it believed would eventually pay off, ‘as China and other countries…close the gap [with] the West’.92 The companies at the opposite end of the spectrum have focused on volume sales and market share, mainly by selling primary-care products, using differential pricing and building generics divisions with acquisitions in key territories. GSK exemplifies this approach; chief executive Sir Andrew Witty is a self-professed ‘extreme bull’ on the growth economies.9320 Pharma 2020
  • The other leading players sit somewhere It seems likely, then, that patentbetween these two poles (see Figure 5). challenges will continue to pose aEli Lilly has been quite selective in its problem for those companies operatinggrowth-markets forays, for example. at the high end of the market. But theIt’s concentrated on selling branded volume plays have encountered theirmedicines.94 Sanofi, by contrast, has share of troubles, too. Political instabilityinvested heavily in building a generics in the Middle East, price cuts in Russiaarm.95 And Merck & Co. (known as MSD and Turkey and intense genericoutside the US) lies in the middle. competition in Brazil have dented theirIt’s linked up with Indian generics performance.101 And though severalmanufacturer Sun Pharma, but the aim multinationals have prospered byis not only to sell existing treatments. muscling out indigenous rivals withThe two companies have also set up a branded generics, that’s at best ajoint venture to develop more convenient short-term measure. Some patientsformulations of branded generics.96 may be willing to pay extra for the reassurance that comes with big brands,Yet few, if any, of these strategies have but the numbers will diminish asgone without a hitch. In March 2012, governments cut back on reimbursementfor example, the Indian government charges and promote local champions.authorised a local producer to make andsell a generic version of Bayer’s cancer Figure 5 Four companies now earn a third of their revenues outside the main marketstreatment Nexavar, even though it’s stillunder patent.97 Novartis is also battlingwith the Indian patent office over its Prescription sales, 2011 (US$ billions)refusal to grant a patent for Gleevec.98 Eli Lilly 4.6 17.1These two cases are probably what Johnson & Johnson 4.8 16.3prompted Roche to reverse its Abbott Laboratories 6.8 13.7longstanding policy of charging the same Roche 7.8 26.8prices for the same products, regardlessof where they’re sold. The company Merck & Co. 10.9 29.1recently announced that it would offer AstraZeneca 11.3 22.6‘significantly’ cheaper versions of its two GlaxoSmithKline 12.7 23.1cancer therapies Herceptin and Sanofi 13.6 22.6MabThera in India by 2013.99 Novartis 15.0 33.3Now China has also revised its Pfizer 16.4 39.6intellectual property laws to permit 0 10 20 30 40 50 60compulsory licences for the production of ROW Main markets: United States, EU-Big 5, Japangeneric versions of patented drugs during Source: Datamonitorstate emergencies, unusual circumstances Note: EU-Big 5 is France, Germany, Italy, Spain and United Kingdom.or ‘in the interests of the public’. Andindustry insiders report that it has GileadSciences’ tenofovir, part of a first-linetreatment for AIDS, in its sights.100 From vision to decision 21
  • Throwing out the rulebook Using mass-market techniques So focusing on the masses isn’t proving to deliver complex services any easier than focusing on the affluent Dr Devi Shetty has perfected the elite who can pay for costly new science of high-volume heart surgery. medicines. But that doesn’t mean it’s At Narayana Hrudayalaya Hospital, impossible to make a profit in the growth in Bangalore, 42 surgeons – each markets. On the contrary, there’s much specialising in a single procedure – pharma can learn from the most perform some 600 operations a week. innovative organisations. Consider the Dr Shetty charges about $1,500 per following examples. operation. Yet his profit margins are higher than those of the typical US Designing products for hospital, and his quality as good.104 people in the lower part of the income pyramid Eye-hospital chain Aravind has also When Ratan Tata decided to develop a used assembly-line techniques to deliver car for India’s urban masses, he started healthcare. It performs about 350,000 with a question: how to produce an operations a year and its operating affordable – and better – mode of rooms have at least two beds, so that transport for people who normally used surgeons can swivel from one patient motorbikes. The result was the $2,500 to the next.105 Nano, a fuel-efficient vehicle that seats four passengers but comes without Pooling resources for expensive frills.102 GE Healthcare has different purposes There’s much pharma can applied the same approach to the When Simon Berry, founder of British medical equipment sector. Among other charity Colalife, wanted to distribute learn from organisations things, it’s launched two stripped-down anti-diarrhoea products in the that have mastered the MRI machines that sell for $700,000 to developing world, he had a brainwave: $900,000, compared with a normal price Coke gets everywhere aid doesn’t, so art of serving the lower of about $1.6 million.103 why not pack the crates with medicines? part of the income Colalife designed a wedge-shaped container that fits between rows of Coke pyramid profitably bottles and is now piggybacking on Coca-Cola’s distribution network.106 The same concept can be used with other products and markets. Indeed, we anticipate that, by 2020, the biggest pharma companies will be pooling resources with health insurers and community care providers in the growth markets to stimulate demand for their products. They’ll also be participating in cross-industry transportation networks to reduce their distribution costs.22 Pharma 2020
  • Making old tools do new tricksIn 1973, a Motorola employee made the Mobile care for the massesfirst public call from a personal mobilephone.107 Today, some 4.2 billion people Patients in many emerging countries their blood sugar count and upload thehave one or more mobile phones.108 And have to travel long distances to see data to a clinician via SMS. They get anthey’re using them to do things Motorola a doctor. But take-up of mobile SMS text back explaining the readingscould never even have imagined (see technologies is much faster than it is in and advising them on whether theybox, Mobile care for the masses).109 industrialised economies with a strong need to do anything more. infrastructure. That’s paving the wayAlmost 14 million Kenyans use mobile- for ‘care anywhere’. In the long term, it may even bebanking system M-Pesa.110 The possible to perform operationsBangladeshi government uses text US software firm Dimagi has remotely, without human input. Themessages to publicise nationwide health developed a mobile phone-based da Vinci Surgical System is currentlycampaigns and provide prenatal advice programme called CommCare that the most advanced commerciallyto pregnant women. Ghana’s Medical allows community workers to gather available surgical robotic system, andAssociation relies on SMS to send doctors information and refer patients for it’s used only in operations where ainformation about national emergencies. treatment by following an electronic doctor’s present. But Italian surgeonAnd the Cambodian Ministry of Health questionnaire. More advanced systems Carlo Pappone supervised the firstoperates an SMS-based disease- will eventually be used to warn unmanned operation in 2006, using asurveillance programme.111 patients about nearby outbreaks of robot based in Boston to perform heart disease or environmental hazards surgery on a patient in Milan.Smartphones and video streaming like pollution.facilities will open the doors to other University of Washington surgeonhealth services. By 2020, patients will India’s Apollo Hospitals Group has Dr Richard Satava predicts thatbe able to consult a doctor remotely and already gone much further. It runs a surgery will be fully automated in thesend information about their symptoms remote triage advice and health next 40 to 50 years. “The future ofto the doctor during the consultation monitoring service, using an IT technology, and medicine in general,itself. Hospitals in major cities will also platform with a structured query is not in blood and guts, but in bitsbe outfitted with interactive holograms database. The service has handled and bytes,” he says. That would makethat can answer basic health questions, more than 700,000 calls since it was complicated operations much moreeliminating the need to talk to a doctor set up. Apollo’s now trialling a remote widely and economically available,at all in some cases. analytics service. Patients with even to patients in regions with few diabetes can, for instance, measure proper medical facilities.The possibilities don’t stop there. Thesame technologies could be used toimprove patient compliance, which is capturing more custom from the roughly concentrate on; which business modelseven lower in the growth markets than 80% of consumers who live outside the to use; how much to invest; and how tothe mature ones. They could also be used developed world – it would be wrong to allocate the funds.to sell certain medicines in very small suggest that all its problems will beunits, with daily or weekly payment via solved. There are impressive gains to be And those decisions will have to be madea service like M-Pesa. made in the growth markets, but they fast. We predict that, by 2020, the won’t be enough to offset price erosion biggest domestic players in the BRICRealism required and patent expiries in the mature markets. economies will otherwise dominate theThese examples demonstrate how some local generics scene. And we fully expectorganisations have tackled the challenge The crucial issue, then, is how to several of these companies to break outof serving the lower part of the pyramid capitalise on the opportunities the of generics with innovative medicinesprofitably. They’ve created new business growth markets offer without risking too developed in their own labs. By the endmodels, not just new products or much or having unrealistic expectations: of 2010 Chinese drugmakers had 39services. Yet even if pharma becomes how to balance boiling water with ice. compounds with US or European patentsmore pioneering – and succeeds in That involves making a number of key in clinical trials – a sure sign of what’s decisions, including which countries to to come.112 From vision to decision 23
  • R&D: Beautiful hypotheses, Some ugly facts Between 2002 and 2011, the pharma and ugly facts biotech sectors spent nearly $1.1 trillion on R&D.113 What has this investment produced? Clearly, new medicines originate in many countries, but most of “The great tragedy of science – the slaying of them are eventually launched in the US. a beautiful hypothesis by an ugly fact.” FDA approvals are thus a reasonable proxy for the industry’s overall output Thomas Huxley over time. In the 10 years to 2011, the FDA approved 308 new molecular entities (NMEs) and biologics. Given how much The productivity crisis the industry invested in R&D each year We touched on pharma’s flagging during the same period, that means the productivity earlier. The situation is now annual average cost per approved so serious that we believe only a few fully molecule ranged from $2.3 billion to integrated organisations will remain by $4.9 billion. And there’s no sign of it 2020. Some companies will be acquired coming down. On the contrary, costs are and stripped of their assets. Others will still rising relentlessly. In the second half separate their R&D from their revenue- of the decade, the average cost per generating activities to reduce risk and molecule was $4.2 billion – 50% more unlock shareholder value. than in the first half (see Figure 1).114 We think there are two aspects to the More with less productivity problem: one scientific, the This trend isn’t sustainable, as the other managerial. We’ll discuss the industry majors realise. Several companies scientific issues – and the decisions they have recently reined in their R&D entail – here. We’ll cover the managerial spending. In February 2011, for example, issues in our next chapter. Pfizer announced plans to cut its R&D budget by a third.115 Sanofi has also been slashing its R&D costs.116 And AstraZeneca’s making 2,200 scientists redundant.117 Many of the big players have simultaneously been experimenting with new R&D structures. GSK set up several Centres of Excellence for Drug Discovery and split them into even smaller units in 2008, hoping this would inject a more entrepreneurial spirit. Sanofi subsequently reorganised its research departments by underlying causes rather than disease areas.11824 Pharma 2020
  • Meanwhile, Eli Lilly has acquired required to achieve one new drug target or mechanism to focus on.ImClone but left it as a standalone approval is increasing in every stage of It usually starts by collating numerousbusiness, as Roche did with Genentech.119 development. In 2007-2011, it took an sources of evidence, drawn largely fromAbbott’s hiving off its research arm as average 30.4 NMEs in preclinical the public domain, to create a hypothesisa separate public company.120 Pfizer’s development to secure one approval, about the role of a mechanism in aconcentrating its resources, with the compared with just 12.4 NMEs in given disease.sale of its nutrition and animal health 2003-2007.125operations.121 And AstraZeneca’s But there’s rarely a single, compellingconverting its neuroscience unit into Frontloading the piece of data validating the mechanism’sa virtual research enterprise.122 R&D process role in the underlying pathophysiology So what accounts for pharma’s poor of the disease. And even if there is,In effect, the industry leaders are all performance in R&D? One of the many the data may be incorrect. When onetrying to do ‘more with less’, but there’s arguments put forward to explain it is industry researcher tried to replicate 53no sign of a big surge in productivity. that the industry’s now focusing on more ‘landmark’ cancer studies, he found thatBetween January and September 2012, complex diseases involving novel targets. 47 couldn’t be reproduced.126 Moreover,the FDA’s Center for Drug Evaluation and That’s true but it’s by no means the very little is known about the feasibilityResearch approved 27 NMEs and whole story. of intervening pharmacologically orbiologics.123 That’s an improvement on demonstrating the desired clinical effect2011, when the agency approved a total The most important – and arguably at this stage.of 30 new drugs in the course of the hardest – decision a pharma companyentire year.124 Yet research from KMR makes during the R&D process is which In other words, the company has toGroup shows that the number of NMEs decide on a course of action before it has much information to go on – and the stakes are very high. If it makes theFigure 1 Costs per approved molecule are unsustainably high wrong choice, it could end up eight or nine years later with a failure that’s cost $1 billion dollars or more. Average cost per molecule Average cost per molecule over five years = $2.8 billion over five years = $4.2 billion It’s therefore essential to focus on 40 6 38 understanding a mechanism’s role in Cost per NME or biologic (US$ billions) 35 34 35 disease as much as possible before 35 4.9 5 Number of approved products 30 4.6 31 embarking on an expensive development 29 28 26 26 26 programme. That means investing more 3.7 4.2 4 25 3.4 3.8 in translational medicine for the 3.7 20 2.7 3 validation of targets and small, speedy clinical studies designed using sensitive 15 2.2 2.3 2 endpoint biomarkers. 10 5 1 Animal models should, by contrast, be used much less frequently because 0 0 they’re a very inaccurate means of 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 predicting efficacy in humans, as Number of NMEs and biologics approved by FDA Cost per NME or biologic experience with the chemokine receptorSources: EvaluatePharma & PwC analysis CCR5 shows. Studies of rhesus monkeysNotes: (1). R&D expenditure on newly approved medicines is clearly historic, but comparing annual investment with collagen-induced arthritiswith annual output over a 10-year period provides an accurate picture of the direction in which costs are moving.(2). We have not taken account of expenditure on line extensions, which varies significantly from one company suggested that CCR5 played a part into another. rheumatoid arthritis (as it does in HIV).127 But when Pfizer launched the first CCR5 inhibitor for the treatment of HIV in 2007, it also tested the drug on patients with rheumatoid arthritis – and found no evidence of efficacy whatever.128 From vision to decision 25
  • In short, investing more money early Lighting the way on in understanding the molecular basis Fortunately, there are now grounds for of a disease and the role a particular hope, as genetics and genomics finally mechanism plays reduces the risk of come into their own. With whole- losing a lot more money further down genome sequencing, we can put diseases the line. And that research should be under the spotlight as never before. rooted in studies of human beings, not other species. Yet, on average, pharma By the end of 2011, there were 1,068 companies spend only 7% of their R&D published genome-wide association budgets on target/mechanism selection studies.129 Such studies normally and validation – a fraction of the sum they compare the DNA of patients suffering spend on clinical trials (see Figure 2). from a specific disease with a control group to identify the alleles associated with that disease. They can’t, alone, Figure 2  Most pharma companies spend a very small percentage of their budgets on determine which genes are causal. But, target selection and validation by covering the entire genome, they can point to new regions for research and Target selection/Validation Approval validate or rule out mechanisms in 7.1 5.0 human populations without conducting clinical trials. Screening/Lead optimisation 21.5 Take the case of cholesterylester transfer Phase III protein (CETP) inhibitors. Experience 39.8 % with statins shows that high-density lipoprotein (HDL) is important in heart disease. So researchers assumed 9.2 boosting HDL would reduce the risk Proof of mechanism/Phase I of myocardial infarction, but trials of 17.4 several CETP inhibitors showed no positive effect.130 Proof of concept/Phase II Why not? The trouble is that HDL Sources: PhRMA Annual Member Survey, 2011, and PwC research concentrations don’t vary greatly from one day to the next, or even from one month to the next. So HDL is an excellent early predictor of heart disease, but correlation isn’t the same as causation.131 And, thanks to genomics, we now have an answer to the question. Researchers used Mendelian randomisation to analyse the link between 15 genetic variants known to affect HDL and the incidence of myocardial infarction. Their findings strongly suggest that alleles that raise HDL don’t cut the risk of heart disease.13226 Pharma 2020
  • Making the most of genetics It won’t be easy, given that there areand genomics 21,000-odd genes in the human Grassroots researchAt present, genomics plays a relatively chromosome, matched by a roughlysmall role in the lab, as one recent survey equal number of RNA-producing Social media sites offer a totally newof 21 large pharma companies shows segments, with promotion, silence, source of genetic and phenotypic(see Figure 3).133 Indeed, we estimate regulation and interaction of both, as data – and one many drugmakersthat the industry spends just $6 billion well as epigenetic influences. There’s are turning to. Personal genomicsa year – less than 7% of its total R&D also far more pleiotropy (where one gene provider 23andMe is among theinvestment in 2011 – on such research. affects multiple phenotypic traits) than pioneers. The company invites the most scientists initially expected. So people who use its testing serviceBut this is an area of study that’s some of the insights the industry’s to share information about theiradvancing very rapidly. Witness the fact unearthing will require years of multi- medical history and lifestyle andthat scientists lately identified some four disciplinary research before they can be contribute it to genetic research.million gene switches in the DNA that used to create new medicines. And, sincewas once dismissed as ‘junk’.134 So we most companies are currently organised 23andMe recently boughtbelieve that, by 2020, pharma could by disease area or indication, as well as CureTogether, which started as anbe investing as much as 20% of its R&D being geographically scattered, they’ll online platform to help people withbudget in genetics and genomics for need to remove the barriers to chronic pain share their experiences.discovering and commercialising information sharing. CureTogether now has more thannew drugs. four million phenotypic data points But despite all the challenges, pharma on more than 500 conditions.It will also draw on a growing number will be in a much better position toof population-based studies with dissect the molecular basis of many The combination could be awell-characterised phenotypes. The UK conditions by 2020. It can then start powerful one. 23andMe has alreadygovernment plans, for example, to release developing targeted medicines to treat built a major database of geneticblinded clinical data on the 52 million them, much as it’s now doing with data on Parkinson’s disease. It’s alsopatients enrolled in the National Health cancer. An example? Several studies collaborating with the ScrippsService (NHS).135 And, by 2020, online have identified four ‘de novo’ mutations Research Institute and Michael J. Foxgenetic testing companies will be another that cause autism.137 Once the list of Foundation for Parkinson’skey source of information (see box, genes grows, and they’re assembled into Research. And, in June 2012, itGrassroots research).136 Together with pathways, it may be possible to diagnose secured its first patent, based on thebetter biomarker screening technologies autism through molecular defects and discovery of a variant in the SGK1and cheaper genomic technologies, this develop an effective therapy for a disease gene that may offer protectionwill help pharma decipher the messages whose underlying pathogenic against Parkinson’s disease inencoded in our genes. mechanism is currently obscure. individuals who carry the high-risk LRRK2 G2019S mutation.Figure 3 Few companies are currently capitalising on the full power of genomics % Companies investing in 94 personalised-medicine research Companies with personalised- 81 medicine partnerships Trials in which DNA samples 50 are collected Companies requiring a biomarker 30for all compounds in development Compounds in Phases IIB-IV 10 with companion diagnostics 0 20 40 60 80 100Source: Tufts Center for the Study of Drug Development From vision to decision 27
  • Focusing to play (iSAEC) is one such instance. iSAEC Cutting to the chase We’ve discussed the importance of has already identified various alleles It’s equally important to devise a clear investing more in the early part of the associated with drug-related liver path to clinical proof of concept for all drug discovery process and capitalising toxicity and skin rashes in patients compounds entering development and on the potential of genomics. But there taking individual therapies. It’s now test them in humans as soon as possible, are several other steps pharma companies exploring several cross-drug alleles using the best tools for selecting subjects can take to enhance their productivity. that could cast light on the underlying and endpoints. Biomarkers have a The first is to become more selective biology of drug-induced SAEs.139 significant contribution to make here by about the therapeutic areas they cover. narrowing down the subset of patients A number of historical rivals have on whom a molecule should be tested A lot of companies try to investigate entered into co-development pacts, and exposing defects more rapidly. So numerous diseases and spread too. Novartis and Amgen are jointly they should be treated as an integral part themselves very thin. We think it’s better investigating a therapy for breast of the route to market, rather than being to focus on a few areas, prune your cancer. Similarly, BMS and Roche are bolted on in late-stage development. portfolio accordingly and bolster your collaborating on a melanoma expertise by hiring or collaborating with product.140 And, in September 2012, Some companies might also want to the best people in your chosen fields 10 leading companies formed a consider novel forms of testing, such of research. non-profit organisation called as n-of-1 trials (where a single subject TransCelerate BioPharma to solve receives two treatments in an alternating Many pharma executives now recognise common drug development problems.141 fashion) and in-life trials. Most the merits of ‘open innovation’ (see organisations still focus on performing box, A problem shared is a problem We believe this pattern will continue traditional randomised controlled trials, solved).138 The industry majors are and that, by 2020, most precompetitive believing that’s what the regulators actively linking up with universities. challenges will be tackled collectively. favour. But the EMA has explicitly stated Some companies are also joining But collaboration with fellow experts that it’s prepared to consider evidence precompetitive discovery federations, is only part of the equation. The other from pre-planned, sequential n-of-1 where public and private institutions part is specialisation: focusing on a trials.142 And the FDA recently approved pool resources to overcome shared select range of diseases, rather than Xarelto for the prevention of strokes in scientific bottlenecks. The international trying – and failing – to cover all patients with atrial fibrillation on the Serious Adverse Events Consortium the bases. basis of a large in-life trial.143 A problem shared is a problem solved Open-innovation platforms such as minds’ to test various compounds that development; to improve the InnoCentive and Kaggle are gradually have been studied in humans but clinical trial process; and to clarify changing the way pharma conducts shelved, to see whether new uses can the development pathway for research. The Pistoia Alliance also draws be found for them. And, in September innovative medicines. on the collective wisdom of pharma 2012, the US President’s Council of and informatics experts from a wide Advisors on Science and Technology Open innovation will solve a number range of organisations to devise and recommended setting up a network of pharma’s problems. It will help document best practice in R&D. And of industry representatives, academic the industry become more pioneering Sage Bionetworks acts as a matchmaker researchers, patient and consumer by allowing it to share pieces of the for computational biologists. groups, physicians and insurance biochemical jigsaw that would companies to address specific otherwise be sequestered in separate Government agencies are getting in challenges. The proposed Partnership organisations and call on researchers on the crowd-sourcing act, too. The to Accelerate Therapeutics would in all walks of life. It will also cut US National Center for Advancing have three major functions: to fill research costs by reducing unnecessary Translational Sciences and industry key knowledge gaps in the science, duplication, as well as sparing patients partners Pfizer, AstraZeneca and Lilly technology and methodologies from exposure to molecules other are tapping the nation’s ‘brightest underlying drug discovery and organisations already know don’t work.28 Pharma 2020
  • Both forms of testing can provide Table 1 These are the core characteristics of traditional, n-of-1 and in-life trialsinsights that traditional trials can’tyield. N-of-1 trials are particularlyuseful for detecting variations in efficacy. Traditional trial N-of-1 trial In-life trialData from individual patients can be Goal To establish clinical validity: To measure variability: does To establish clinical utility:aggregated and analysed to extract does the intervention work? the intervention work in an does the intervention work inbroader inferences.144 In-life trials reveal individual patient? the ‘real’ world?how well a product works in the real Setting Experimental: hospital or Normal: community-based Normal: community-based academic medical centre care careworld and provide proof of its economic Participants Carefully selected to maximise Single subject Representative of everydayvalue (see Table 1).145 patient compliance clinical practice Intervention Strictly enforced fixed regimen Alternating treatments Flexible, as in daily lifeConducting in-life trials isn’t easy. Comparator Placebo or directly competing Placebo or directly competing Usual care, including leastMany doctors working in community therapy therapy expensive/most effective treatmentpractices don’t have any experience ofparticipating in clinical trials, so they Data points Clinical endpoints Clinical endpoints, quality of Clinical endpoints, quality of life, use of resources and costs life, use of resources and costsneed to be trained. Most such trials also Outcomes Condition-specific, often Condition-specific, with Long-term measures thatrequire larger samples to cover losses short-term surrogates or periodic re-testing for reflect disease progression process measures longitudinal studies and broad range of outcomesfrom patients dropping out. And it’soften harder to interpret the results, Sources: S. Treweek & M. Zwarenstein, ‘Making trials matter: pragmatic and explanatory trials and the problem of applicability’; PwCboth because practitioners are free totreat patients normally and becausesome patients may be taking multiplemedications. The real McCoySo in-life trials aren’t a substitute for Several healthcare providers are the gauntlet with a $10-million prizerandomised controlled trials. And, piloting remote monitoring schemes. for the first person who builds a toolmanaged badly, they simply drive up The British NHS is rolling out one such capable of capturing ‘key healthcosts. But that’s not what we’re project: 4,000 patients with chronic metrics and diagnosing a set ofadvocating here. The point we’re making diseases will be given touchscreen 15 diseases’.is that pharma should be conducting phones that can monitor their healthdifferent kinds of trials to answer and vital signs remotely. Meanwhile, new audio technologiesdifferent questions. And it should be will transform the way in whichdoing both as efficiently as possible, Some of the biosensors in development patient data is captured andusing an increasingly sophisticated can also be used for point-of-care categorised, if inventors like Steveelectronic infrastructure (see box, diagnosis. Israeli chemical engineer Goldstein have their way. Goldstein,The real McCoy).146 Hossam Haick has, for example, who heads acoustics specialist built an artificial ‘nose’, which detects Personics Labs, recently filed a patentMoreover, since the emphasis healthcare various cancers by picking up disease application for an ‘always-onpayers put on evidence of comparative markers that move from the headwear recording system’ thateffectiveness will only grow, the industry bloodstream into the lungs and automatically records audio and filesshould be collecting that information get exhaled. the recording in a separate storagebefore it goes to market. Conducting device. By 2020, such technologiessuch research poses challenges at any The race is now on to develop a Star will be used to compile EMRs. Thetime (e.g., selecting the most appropriate Trek-style medical ‘tricorder’. In the doctor will wear an in-dwellingcomparator, dose and administration long-running TV series, fictional USS hearing device that automaticallyregime, study population and endpoints Enterprise medical officer Dr ‘Bones’ records patient consultations andfor comparison).147 But doing it when a McCoy could diagnose a patient’s stores the information so that it candrug has just been launched is even condition simply by scanning his body. easily be retrieved to provide aharder because of rapid changes in the Global telecoms equipment provider synopsis of previous visits or a fullcharacteristics of the user population Qualcomm has recently thrown down patient history in real time.during the early phase of marketing.148 From vision to decision 29
  • Figure 4 New forms of medical intervention are in the pipeline New delivery technologies are also expanding the ways in which it’s possible to insert antigens into the immune system. Researchers at the University of Vaccines Human-computer Regenerative interfaces medicine Oslo have developed one approach that uses electrical impulses and DNA code to trigger a molecular reaction. The Vaccines to prevent Biomonitoring new infectious technologies Tissue repair technology has two major advantages; it diseases and implants dispenses with the need for an adjuvant and produces a much quicker, more Vaccines to treat Self-regulating Tissue powerful immune response.152 chronic diseases drug delivery replacement and addictions technologies A new generation of vaccines is now in Vaccines to Autologous the pipeline. Some of them aim to treat Artificial organs prevent diseases and exoskeletons replacement infectious diseases like malaria and HIV and addictions body parts or antibiotic-resistant pathogens like MRSA.153 Others aim to treat chronic Mind-controlled or acute conditions and addictions. prosthetics Vaccines for a wide range of chronic illnesses, including diabetes, obesity and Source: PwC cardiovascular disease, are already in clinical development.154 Several cancer vaccines are also showing considerable Turning to new Moving the needle with early promise, one such instance being treatment types new vaccines a ‘universal’ vaccine that operates on the We’ve talked about what pharma can The induction of antibodies by principle of training a patient’s body to do to improve the speed and skill with prophylactic vaccination against recognise and destroy tumour cells by which it develops new medicines, but infectious diseases has been the most itself.155 And work on vaccines to curb those aren’t the only aces in the deck. effective medical intervention in nicotine and cocaine addiction is Just as the insights provided by genomics human history.149 Bill Gates recently likewise well underway.156 are one reason to feel optimistic, so is acknowledged as much when he called the progress scientists are making with on the World Health Assembly to make Many of these new vaccines for non- new forms of medical intervention this ‘the Decade of Vaccines’ and set infectious conditions are designed to (see Figure 4). some basic goals: eradicate polio in slow down, as distinct from curing or the 1% of the globe where it remains; preventing, disease. But it’s prophylactic The industry’s options are increasing, develop five or six new vaccines; and vaccines that represent the industry as these new avenues open up – and build a system capable of delivering El Dorado – and here, too, there’s been some forms of intervention could be vaccines to every child. That, he said, progress. Novartis recently filed for particularly helpful in dealing with would ‘save 4 million lives by 2015 approval of a vaccine that protects the HONDAs who consume a and 10 million lives by 2020’.150 infants against meningococcal disease, disproportionate share of healthcare for example, while GSK has commenced resources. New drug delivery Advances in vaccinology are providing Phase III trials on a recombinant vaccine technologies could reduce non- the tools with which to develop more for preventing malaria.157 And Inovio compliance, while new vaccines and effective vaccines for a much wider Pharmaceuticals is testing a synthetic regenerative medicine could provide range of diseases. With structure-based DNA vaccine that might both treat and a way of preventing or curing certain antigen design, for example, X-ray prevent infection with HIV from clade B, chronic conditions. crystallography is used to determine the subtype of virus mostly seen in North the three-dimensional structure of an America and Western Europe.158 antigen-antibody complex and then computational protein design is used to engineer an antigen.15130 Pharma 2020
  • Building bionic bits Replacing damaged neurological tissue There are unique challenges with theThe realm of man/machine interfaces is and entire organs is, of course, the end manufacturing and characterisation ofproving equally exciting. Scientists at goal – and, despite the enormous cell and tissue therapies, too. Living cellsMassachusetts Institute of Technology challenges, it’s no longer a far-fetched are unstable, which means it’s essential to(MIT) are, for example, developing a fantasy. In January 2012, scientists at assess the effect of biological variability‘smart tattoo’ with a nanoparticle ink the General Hospital of Chinese Armed on each stage in the manufacturingthat can track glucose levels in patients Police Forces began a Phase II trial on process. Moreover, cell and tissuewith diabetes.159 And researchers at the use of umbilical cord stem cells in therapies can’t be terminally sterilised,China’s Chongqing University have built treating motor neuron disease.165 And, and cryopreserving the starting cella prototype temperature-controlled drug in June 2012, US biotech company source or final product could impairrelease system using titanium nanotubes Advanced Cell Technology started its quality.169covered in a layer of hydrogel.160 Both testing retinal pigment epithelium madehave obvious uses in pharma. from embryonic stem cells to treat In short, many of these new therapies Stargardt’s disease, a condition that will require much more complexMeanwhile, the US Department of destroys the central vision of the eyes.166 development, manufacturing andEnergy Office of Science is spearheading distribution processes than those usedefforts to develop a device containing But perhaps the best illustration of what to produce conventional medicines. Yethundreds of microelectrodes that can be scientists can achieve comes from a they will also generate enormous clinicalimplanted in the eyes of people blinded remarkable international collaboration and commercial value. A prophylacticby retinal disease.161 Swiss researchers in mid-2011. Doctors at Stockholm’s vaccine for a common chronic conditionare developing a wheelchair driven via Karolinska Institute completed the or stem cell therapy that cures aelectrodes placed on the skin in a world’s first synthetic organ transplant, neurodegenerative disorder won’t earnskullcap. And animal tests have been using a trachea ‘grown’ on a scaffold at revenues from repeat prescriptions.conducted in which devices are London’s UCL Medical School and But it will command a very much higherimplanted directly into a nerve to process soaked in stem cells from the patient’s price precisely because it provides aand transmit signals wirelessly to an bone marrow in a bioreactor made by permanent solution. Such products willexternal object.162 British professor of Harvard Bioscience.167 be tomorrow’s blockbusters.cybernetics Kevin Warwick has eventested a neural implant on his own The return of the blockbuster Keeping an open mindnervous system.163 So conventional pharmacological agents Whatever diseases and forms of medical – personalised or otherwise – aren’t the intervention a company decides to focusGrowing new parts industry’s only hope. On the contrary, on, though, and whatever methods itWith regenerative medicine, it may its options are getting steadily wider and, chooses to discover and develop neweventually be possible to do away with by 2020, we think there will be far more treatments, one thing’s vital: keeping ansome biomechanical aids altogether. diversification. But many of these open mind until clinical proof of concept.Several tissue-repair products, such as options will require profound changes in It’s always painful to see a beautifulDermagraft, are now on the market. But R&D, manufacturing and distribution. hypothesis slain by an ugly fact. It’s eventhat’s just the first step. The second is more painful when that hypothesis hastissue replacement, using 3D bioprinters When human cells and tissues are tested consumed a lot of money.to print living tissue with ‘ink’ derived in animals, for example, there’s afrom human cells. cross-species immune response that complicates the findings. In addition,Various organisations have already made the way the cells are distributed in theheadway in this field. In late 2010, for bodies of healthy and diseased animalsexample, US biotech firm Organavo often varies, which may have a bearingcreated the first blood vessels to be on the safety endpoints that are used.bioprinted using cells cultured from a Testing gene and cell therapies insingle person. It’s also successfully humans poses other problems, includingimplanted bioprinted nerve grafts into the risk of undesirable mutations andrats and hopes to start human trials of transmission of the transplanted genebioprinted tissue by 2015.164 to germ-line or transplacental cells, although the latter has never yet been observed.168 From vision to decision 31
  • Portfolio management: Now here’s the nub. Only 40% of customers were drawn to the small Choosing the best jam selection, whereas 60% stopped by the large one. But 30% of those who’d been given a choice of six flavours purchased a jar of jam, while only 3% of those “If you must play, decide on three things at the start: the who’d been given a choice of 24 flavours rules of the game, the stakes and when it’s time to quit.” did so. Confronted with two dozen samples, most people were paralysed Chinese proverb by indecision.170 Choosing which drug candidates to progress through the pipeline is far more difficult than choosing which kind of Flummoxed by all jam to buy, and a lot more rests on the the flavours choice. Yet many pharma companies are In 1995, social scientist Sheena Iyengar behaving like the customers in that food set up a tasting booth in a US food store store – with one major difference. Rather and pretended to be a supplier of than walking away without purchasing gourmet jams. Every few hours, she anything, they’re buying a jar of jam in switched between a selection of six every flavour. flavours and 24. On average, customers tasted two flavours, regardless of the size of the assortment. Table 1 The biggest pharma companies have numerous projects in their pipelines Company Pre-clinical Phase I Phase II Phase III Total Abbott Laboratories 40 35 51 16 142 Amgen 21 47 74 14 156 AstraZeneca 27 80 116 27 250 Bristol-Myers Squibb 57 94 114 23 288 Eli Lilly 22 62 126 24 234 GlaxoSmithKline 46 115 217 44 422 Johnson & Johnson 30 48 73 15 166 Merck & Co. 35 60 82 35 212 Novartis 27 79 225 50 381 Pfizer 71 92 120 31 314 Roche 49 127 133 37 346 Sanofi 33 64 80 31 208 Total 458 903 1,411 347 3,119 Source: EvaluatePharma. Phase III figures verified by cross-referencing EvaluatePharma data with latest available company-reported pipelines and ClinicalTrials.gov Note: Excludes abandoned and suspended projects.32 Pharma 2020
  • The bitter taste of failure Table 2 Failure rates in clinical trials have soared in the past 20 yearsWe discussed the scientific factorsbehind pharma’s declining R&Dproductivity in chapter 4. Managerial Attrition rates Current reasons for failurefactors play a big role, too, and one of 1990 2010the biggest factors is poor decisionmaking. As Table 1 shows, many of the Phase I 33% 46%industry leaders have more than 100 Phase II 43% 66% Insufficient efficacy (51%)projects in Phases II and III. Most of Safety concerns (19%)these projects are destined to fail. Strategic issues (29%) Phase III 20% 30% Insufficient efficacy (66%)Attrition rates in clinical trials have Safety concerns (21%)climbed steeply over the past two Sources: Fabio Pammolli et al., ‘The productivity crisis in pharmaceutical R&D’; Steven M. Paul et al., ‘ How to improvedecades. What’s more instructive, R&D productivity; and John Arrowsmith, ‘Trial watch: Phase II failures: 2008-2010’; ‘Trial watch: Phase III andthough, is when – and why – so many submission failures: 2007-2010’; and ‘A decade of change’molecules have foundered (seeTable 2).171 The high percentage ofproducts pulled for strategic reasons So pharma’s spending vast sums ofin Phase II suggests that one problem money buying jars of jam in everymay be overlapping activity between flavour, only to find that most of themcompanies with very similar compounds don’t pass muster. To quote equitiesin the pipeline. That’s grounds for analyst Andrew Baum, it’s ‘failing late,greater collaboration.172 But there’s failing more and failing expensively’ –a second, and far more serious, issue. and that’s caused ‘some world-champion value destruction’.175Between 2007 and 2010, 83 compoundsfailed in Phase III or during the Why? We think it’s because manysubmission process. Analysis by CMR companies don’t really understand theInternational shows that 66% of them relationship between risk and value.fell near the final post because of They’re also over-optimistic and, as ainsufficient efficacy: 32% were no better result, they’re trying to do too much.than a placebo; 5% were no better thanan active control; and 29% showed noreal benefit as add-on therapies.173In short, the researchers concluded,many companies seem to be pushingcandidates that display only marginalefficacy in Phase II proof-of-conceptstudies into Phase III trials. Many alsoseem to think that success in one diseasewill translate into success in a differentdisease, without firm evidence that themechanism of action is still relevant.174 From vision to decision 33
  • Deciding on the rules, the Figure 1 A clear risk/value framework helps companies make better decisions stakes and when it’s time to quit What should such organisations do? Front runners Long shots Their options are limited, since they can’t conjure up new molecules. But what they can do is prune their portfolios to focus on the compounds with the greatest Potential value probability of success. We recommend using two yardsticks: therapeutic expertise and the risk/value ratio of each compound in the pipeline. Plotting the correlation between risk and value helps to separate the frontrunners from the long shots, and the low-hanging fruit Low-hanging fruit Laggards from the laggards (see Figure 1). Risk Of course, most companies do consider the risk and potential value of the Source: PwC molecules in their portfolios, but they rarely draw on all the information at their disposal. When they measure risk, Table 3 The risk/value equation has many dimensions for example, they generally concentrate on technical risks: how novel a target or mechanism is, the degree of confidence Potential value Risks in rationale and so forth. They spend much less time considering commercial Technical and regulatory risks Commercial risks risks like market access or whether a What’s the prevalence of the How complex is the disease? How many other companies are disease? working on the disease? product offers enough improvement on the existing alternatives (see Table 3). How serious is the disease? How new is the biological target? How many other treatment What are the implications of options exist? hitting it? Similarly, when they measure potential What’s the cost of treating How new is the mechanism of Is the product better enough, value, they don’t give sufficient thought individual patients? action? given the competing therapies? to what payers or providers think. One What’s the total medical spend What’s the level of confidence Is it better enough, compared with problem here is that there’s no consensus on the disease? in rationale? normal care? definition of outcomes for some diseases What are the generic and What pharmacokinetics and/or What’s the product’s economic – and thus no common way of assessing non-drug alternatives? bioavailability issues exist? profile, relative to that of the the value a new medicine might generate. competing therapies? But most companies don’t discuss the How useful is the product? Do we know enough about the Will healthcare payers and issue with healthcare payers and disease population, patho- physiology, pharmacological providers want to use it? And what incentives will they providers. There are a few honourable properties of the compound etc. require (e.g., patient access to use modelling and simulation? schemes, add-on services)? exceptions. GSK now consults health officials and insurers at least five years How much safer, more effective Will the product need a Will healthcare payers and or easier to use is it, relative to companion diagnostic to get providers be prepared to pay for before a medicine’s due to leave its labs. competing therapies? approved? the product? If so, how much? And, in 2011, Sanofi brought in Medco What is its unique selling point, How far is it from proof of What will healthcare payers and Health Solutions to stress-test its entire relative to the alternatives? concept? And is there a clear providers require to buy it development path? (e.g., outcomes data, discounts, Phase I development programme.176 Such risk-sharing contracts)? companies are still in the minority, though. How might it reduce overall Will the product require a complex Will patients take the product healthcare costs? manufacturing process, as prescribed? formulation and/or packaging? Can it command a premium price? What are the likely pre-approval What future opportunities exist, regulatory hurdles and post- (e.g., line extensions and OTC regulatory requirements (further formulations)? studies, risk management etc.)? Source: PwC34 Pharma 2020
  • Building a balanced Moreover, this isn’t an exercise that portfolio should be done once or twice a year. The next step is to build a balanced Good investment managers constantly portfolio, just as investment managers keep an eye on their portfolios, buying try to do when they’re managing and selling assets on a regular basis financial assets. Responsible investment to maintain the balance between risk managers don’t bet all their clients’ and potential value on which they’ve money on risky assets that might, with decided. Most pharma companies, by luck, deliver a big return. They combine contrast, only review their portfolios every six months.Good investment managers a few highly speculative investments with bread-and-butter stocks that willconstantly keep an eye on generate a steady income. Admittedly, drug candidates aren’t as volatile as shares. Nevertheless, a clinicaltheir portfolios pathway can be completely redesigned But many pharma companies assume they should be concentrating on the in six months, as we noted earlier. So it’s molecules with the greatest potential crucial to monitor the drug portfolio revenues. They also underestimate the continuously and dynamically – and to risks, or overestimate the potential be decisive. value, of the products in their pipelines. That’s partly because they rely on the Adopting a more discriminating opinions of the researchers involved – approach has two advantages. First, who naturally ‘talk up’ the projects it frees up resources for the candidates they’re working on. So it’s essential to a company chooses to focus on – which appoint an independent committee of increases the odds of getting them to senior executives to decide which market. Second, it helps the company products to pull and which to progress, reduce its R&D costs. And even if it and to be completely objective during only succeeds in lowering its cost base the appraisal process. without increasing its output, it’s still improved its productivity. From vision to decision 35
  • Thinking like an investor Examination of the pipelines of the It’s not enough to look at a company’s 11 industry majors shows there are R&D portfolio in isolation, though; significant differences in the quantity and senior management should also consider quality of the key candidates they have how strong or weak it is relative to those in Phases II and III (i.e., those to which of other companies in the sector. When analysts have assigned an rNPV).177 investors decide where to put their That, in turn, means there are significant money, they compare different differences in their total pipeline rNPV. companies – and the competition for But the sums the 11 companies invest in capital has become intense, following R&D also vary, so it’s the relationship the global economic downturn. between their R&D expenditure and pipeline rNPV that really counts. In Thinking like an investor helps Figure 2, we’ve compared the two, using average annual expenditure over the past Thinking like an investor executives see their business as others 10 years to eliminate significant changes see it and expose hidden assumptions. helps executives see their We’ll focus on the quoted industry in spending from one year to the next. business as others see it majors, using risk-adjusted net present This simple comparison shows that three value (rNPV) analysis – now the standard technique for valuing companies have a pipeline rNPV of more pharmaceuticals – to illustrate what than three times their average annual we mean. R&D outlay over the past decade. Conversely, two have pipeline rNPVs that are less than their average annual investment in R&D. Figure 2  The ratio of pipeline risk-adjusted NPV to R&D expenditure differs considerably from one company to another Ratio of rNPV to average yearly R&D expenditure (2002-2011) A 3.63 B 3.28 C 3.21 D 2.29 E 1.82 F 1.26 G 1.09 H 1.07 I 1.00 J 0.90 K 0.73 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Sources: EvaluatePharma and PwC analysis Note: The rNPV of each pipeline is the aggregate rNPV of all the products in Phases II and III to which analysts have attributed a value. The rNPV of each product has been calculated using consensus sales forecasts to 2018. Sales beyond 2018, costs and resulting cash flows have been projected over the life of each product to 2032. Terminal growth methodology has been applied to calculate the value of any cash flows after 2032. All R&D costs have been treated as ‘sunk’.36 Pharma 2020
  • Some of these disparities are due to Companies B and C have cast their nets molecules in their portfolio mix.differences in the extent to which the 11 more widely. Even so, more than 40% Handled badly, this strategy can dilute acompanies in-license compounds rather of their pipeline rNPV comes from company’s focus, but their pipeline rNPVthan generating them organically. R&D compounds with an rNPV of > $1 billion, suggests that B and C are striking thecosts are typically expensed via the whereas company K has no such right balance.income statement, whereas upfront compounds in its portfolio. In fact,in-licensing fees and milestone payments two-fifths of its pipeline rNPV comes In other words, the three industry majorsare typically capitalised and amortised from products with a potential value of with the most promising pipelinesover the useful life of the resulting < $500 million. (measured in terms of rNPV) haveproducts. decided on the rules by which they’re So what accounts for these differences? playing and stuck to them. That’s whatThe kinds of therapies a company We believe two factors – therapeutic we think all pharma companies shouldfocuses on are also a factor, as is the focus and the ability to manage risk do: weed out their weakest compounds,spread of its assets. The trials required – have played a big role. Company A has with disciplined and continuousfor primary-care products are often been very selective. It’s pursued a portfolio management; concentrate onlarger and more costly than those low-risk, high-value strategy and the frontrunners, with some bread-and-required for specialist products. And a controlled its risks by combining critical butter molecules to provide stability andcompany with a lot of late-stage assets mass with rigorous portfolio a few long shots that might generatewill probably be spending more on trials management, whereas companies B and really high returns; cut their R&D costs;than one with a lot of assets in earlier C have managed their risk by spreading and communicate what they’re doingstages of development. it. Both are developing a wider array of effectively. Winners know when to products in a wider range of therapeutic double-down on their investment, butBut the variations are too marked for areas. Both have also recognised the they also know when to quit.this, alone, to explain them. In Figure 3 merits of including ‘bread-and-butter’we’ve therefore looked more closely atthe composition of each company’s Figure 3 The way value is distributed differs widely between companieslate-stage pipeline. We’ve divided thekey candidates in each portfolio into sixclusters, ranging from the most valuable US$ billions(those with an rNPV of > $1 billion) to Athe least valuable (those with an rNPV Bof < $125 million). CCompany A has 10 key molecules in Dlate-stage development and four of them Ehave an rNPV of > $1 billion. These Fcompounds collectively representfour-fifths of its total pipeline rNPV. GCompany J has also concentrated on the Htop end of the value spectrum, but it has Ifar fewer key candidates in late-stage Jdevelopment. K 0 5 10 15 20 1,000+ 750-1,000 500-750 250-500 125-250 0-125 Sources: EvaluatePharma and PwC analysis From vision to decision 37
  • Corporate culture: Pharma’s business model has also altered almost beyond recognition. In Culprit and cure? the 1980s and 1990s, it made medicines for chronic diseases, marketed them to doctors and focused on turning them into blockbusters. These days, it’s “The ultimate measure of a man is not where he stands concentrating on specialist medicines, in moments of comfort, but where he stands at times of which it markets to healthcare payers – who use different, and more rigorous, challenge and controversy.” selection criteria (see Table 1). Martin Luther King, Jr. But despite such seismic shifts, the organisational culture at many pharma companies has changed very little – or, The values, beliefs, habits and if it has changed, some people suggest, management style that determine how it’s only changed for the worse. “The Big people in an organisation think and Pharma culture has been homogenized, behave have a profound bearing on its purified, sterilized, whipped, stirred, decision-making processes. And when filtered, etc. and lost its ability to ferment the environment in which the the good stuff required to innovate,” organisation operates alters, these life sciences venture capitalist Bruce characteristics often need to alter, too. Booth argues.178 Yet most pharma companies still rely on a corporate culture that prevailed Booth isn’t alone in blaming the 20 years ago. industry’s declining scientific productivity on cultural influences. The 1980s and 1990s were a period of In one recent survey of 150 R&D relative economic stability. Today, there’s executives, 54% cited lack of creativity much more economic volatility. The as a key organisational issue, while 53% global distribution of wealth is also cited lack of coordination between the shifting, with the rise of the growth R&D and commercial functions.179 markets and greater gender equality. Why this cultural sclerosis? One possible Demographic and epidemiological reason is the fact that most of the trends that were still on the distant industry’s top executives learned their horizon in the early 1980s have business while the blockbuster model simultaneously come to the fore, while reigned supreme. They were also new communication technologies have promoted from within, or recruited from empowered individuals. In the Facebook similar companies, and naturally tend to era, patients can see – and say – more reinforce the existing culture because it’s about the organisations they deal with, the one in which they feel comfortable. and the medicines they take, than at any previous time in history.38 Pharma 2020
  • That’s slowly changing with the 4.8 years for the chief executive and justappointment of a number of younger 3.6 years for the head of R&D.181 Thisexecutives keen to embrace new ways presents particular problems for anof doing business and growing internal industry whose product developmentacceptance that the existing state of cycle is at least a decade. In essence, theaffairs can’t continue. As revenues, incumbent management has to makeprofits and share prices fall, and major decisions it can’t see through toredundancies become more widespread, the end.many employees have recognised thatthe old days are truly over. To sum up, then, today’s top pharma executives face a formidable test.But shorter periods in office are also an They must pilot their companiesobstacle. In 2000, the average tenure of through turbulent waters, drawing ona chief executive was 8.1 years; by 2010, experience acquired in very differentit was down to 6.6 years.180 It’s lower circumstances, without any leeway instill in pharma, with a typical tenure of which to make mistakes.Table 1 The context in which pharma operates has changed dramatically Forces of change • Banking, financial and sovereign debt crises • Globalisation • Demographic and epidemiological pressures • Advances in communication technologies • Declining R&D productivity • Shift in direction of R&D Old environment • Healthcare reforms New environment (1980-2000) (2011-2020+) • Economic stability • Economic volatility • Focus on top 10 markets • Focus on key mature markets and • 6.0%-6.9% of global population aged 65+ growth markets • Print, television, websites • 7.6%-9.4% of global population aged 65+ • Blockbuster business model (chemical molecules • Obesity epidemic with annual revenues of > $1.0 bn per product) • Social media • Treatments for chronic conditions • Specialist-medicine business model (proteins • Products marketed to primary-care physician with annual revenues of > $1.0 bn per product) • Total number of prescriptions and unit sales • Treatments for rare/acute diseases • Products marketed to healthcare payers • Value-based purchasing (using outcomes)Source: PwC From vision to decision 39
  • Creating a more Set clear rules and stick to them innovative culture Both employees and shareholders need So what can the industry’s senior figures to know where they stand, so it’s crucial do? We believe there are a number of to set clear ground rules. Internally, changes they can initiate to foster a more senior management should specify the creative corporate culture and sort of innovation it wants, how it plans reinvigorate their companies.182 to measure innovation and the trade-offs it’s willing to make. It should also make Bring fresh blood into the sure the right resources are in the top team right places. Successful innovation requires strong leadership, commitment and solid Externally, senior management should decision-making. It also requires an open let investors know how much the mind and the courage to experiment – company plans to spend on R&D over Successful innovation both traits that are harder to find in the next few years – and stick to its guns companies where most of the management in the face of short-termism. Jeffrey requires strong leadership, comes from the same mould. Immelt, the highly respected head of commitment and solid General Electric, has long followed this There’s relatively little gender or racial policy. “Over a 10- or 20-year time decision-making diversity in the top echelons of most period, the businesses that are hard to pharma companies, although the do had the best returns,” he says. “So the industry’s not unusual in this respect. arithmetic works over time.”183 Only 10.5% of the 3,933 pharma and biotech directors in the BoardEx global Lessen the layers leadership database are women. Too much bureaucracy stifles creativity Similarly, only 10.2% of the 1,500 who – and big pharma companies tend to disclose their nationality come from be very bureaucratic. We recommend countries outside North America and eliminating as many layers of middle Europe. A mere 55 come from the BRIC management as possible, minimising economies. But, with globalisation and the number of committees and creating the rise of the growth markets, many autonomous R&D teams that report pharma companies will need to recruit straight to the top. Locating these teams more widely. in biotech clusters can also stimulate innovation. Some organisations might also want to consider hiring first-class executives But the main point is to remove from other industries, although they’ll roadblocks. Every R&D team should be have to exercise considerable care. given a specific challenge, budget and Pharma depends on specialist knowledge timeframe, and then left to get on with more heavily than most other industries, the task without having to plough and bringing in outsiders hasn’t always through vast quantities of paperwork, proved a positive experience. That said, grapple with the latest management hiring from a broader talent pool gives a craze or worry about surviving the next company access to new ideas and cull. If a team doesn’t deliver, it should methods, which helps it thrive in periods certainly be held accountable – but not of turmoil. before it’s had a chance to do its job.40 Pharma 2020
  • Recruit non-conformists, build Use the right measures and Times of challengenetworks rewards and controversyMost companies, pharma included, focus Many pharma companies measure and A company’s culture alters only when theon recruiting people whose ‘faces will reward the wrong things. For example, people who work in it alter how theyfit’. Yet it’s sometimes better to hire the they use purely financial criteria to think, talk, decide and act – and that‘wrong’ people because they’re the ones measure innovation. They reward happens only when top managementwho’ll challenge the status quo. There’s researchers for getting new molecules shows the way. It’s now more imperativea lot of research to show that mavericks to the point immediately prior to testing than ever for pharma’s business leadersplay a major role in innovation.184 in man – which encourages those to blaze a new trail.They’re typically independent-minded, researchers to push unviable compoundspassionate about what they do and further down the pipeline. And they The industry is going through a periodwilling to break the rules. Such people promote their best scientists to of profound change. Any company thatcan therefore be a great source of management positions, although wants to weather the transition will haveinspiration, although managing them scientific expertise is no guarantee of to focus on delivering value, notisn’t easy. managerial competence. charging high prices. It will have to supplement its products with services.But, ultimately, innovation isn’t In our experience, it’s better to use a And it will have to become an integraldependent on individuals; it’s the measurement system that combines part of the healthcare continuum.product of networks of people, both financial and non-financial metrics (likewithin a company and outside it (e.g., motivation and commitment). That The smartest and most charismaticpartners, suppliers and customers). system should also be flexible enough to executives already know this. They’reThat’s especially true of pharma, where measure different kinds of innovation building organisations with the couragenew sciences like genomics are so and easy to understand. Similarly, it’s to explore and flexibility to thrive incomplex that unravelling the insights better to reward scientists only when a different conditions. Others continuethey offer requires a multi-disciplinary molecule reaches proof of concept or to preside over companies that hark backapproach. So it’s equally important to when they solve serious problems. This to a more comfortable past. Yet thebuild networks that cut through the encourages them to focus on creating ultimate measure of an enterprise – as itbarriers between different business units compounds with a real chance of success is of the people who lead it – is not whereand organisations, and encourage in the clinic. It also strengthens the links it stands in ‘moments of comfort’, butgenuine collaboration to get access to the between R and D. where it stands at ‘times of challenge andbest science. controversy’ such as now. But it’s not enough to reward success;Numerous open-source R&D initiatives it’s equally important to promote a ‘failhave been launched in recent years and early, fail cheaply’ mindset by providingsome of them have been very successful. incentives for terminating weak candidatesYet significant cultural hurdles remain. as fast as possible. Punishing failureOne big stumbling block is fear of socially or economically discouragessharing intellectual property, even risk-taking and dampens creativity.though collaborating providesopportunities for developing newassets.185 A second is the industry’s‘reluctance to let go of unnecessarilyindividualistic business processes’.186 It’s now more important than ever for pharma’s business leaders to blaze a new trail From vision to decision 41
  • Conclusion: From vision • Every company will have to be more selective about the diseases it to decision addresses. Many will also have to consider the implications of investing in new treatment types, such as vaccines and regenerative medicine. “Almost anything can be turned around: out of every • Every company will have to invest ditch, a path, if you can only see it.” more heavily in genetics and genomics, Hilary Mantel and revise its R&D processes to improve its scientific productivity. That will involve sifting through a plethora of new technologies, singling out the best and making sure they’re properly integrated. The next few years may look bleak for pharma, but we’re convinced that the • Every company will have to collaborate following decade will bring a golden era with academia, governmental and of renewed productivity and prosperity. non-governmental organisations, We’ve discussed our vision of the future fellow life sciences companies and in earlier Pharma 2020 papers. Our focus other stakeholders, such as the here is on how companies can reach regulators and patient groups, to get 2020 in a position to deliver better access to the best science and outcomes and profit from the changes eliminate waste. that lie ahead. • Every company will have to be more discriminating about the candidates it The paramount challenge is to create advances through the pipeline and more value for patients, providers and courageous enough to dump the junk payers – and thus for shareholders. before racking up big bills. Clearly, the route each company takes will depend on its individual aims and • Every company will have to make sure circumstances. Nevertheless, there are a it behaves ethically at all times and is number of common imperatives. an organisation others want to associate with. That means being open • Every company will have to provide and honest rather than treating real-world data on the outcomes its compliance with the regulations as a medicines deliver, and that will entail cost of doing business. setting up a suitable infrastructure to • Every company will have to transform capture such data. its corporate culture to foster • Every company will have to decide innovation and address the needs of how much (if anything) to invest in patients, payers and providers in the the growth markets, where to invest twenty-first century. and what strategies to pursue in the countries it targets. The biggest markets There is indeed a path out of every ditch might not be the most profitable ones, for those who can only see it. That path for example, and the costs of setting up may be hard – strewn with impediments, a local manufacturing arm might forking in unforeseen ways, demanding outweigh the additional custom. decisions that are very difficult. But those companies that survive the journey will reap significant gains. In another decade, they’ll have the scientific and technological edifice to start developing medicines that render some of the most serious diseases from which we now suffer curable.42 Pharma 2020
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  • 157. PhRMA, ‘Medicines in Development: Vaccines 172. John Arrowsmith, ‘Trial watch: Phase II failures: (2012). 2008-2010’, Nature Reviews Drug Discovery, Vol. 10 (May 2011), p. 1.158. ‘Special report on PENNVAX-B’, FiercePharma (15 October 2012), http://www.fiercevaccines. 173. John Arrowsmith, ‘Trial watch: Phase III and com/special-reports/pennvax-b submission failures: 2007-2010’, Nature Reviews Drug Discovery, Vol. 10 (February 2011), p. 1.159. Anne Trafton, ‘“Tattoo’ may help diabetics track their blood sugar’, MIT News (28 May 2010), 174. Ibid. http://web.mit.edu/newsoffice/2010/glucose- tattoo-0528.html 175. Ben Adams, ‘Value destruction: pharma has only itself to blame’, InPharm (10 February 2012),160. Martin Grolms, ‘Fever Responsive Drug Delivery’, http://www.inpharm.com/news/171302/ Materials Views (3 December 2010), http://www. value-destruction-pharma-has-only-itself-blame materialsviews.com/fever-responsive-drug- delivery/ 176. 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Work: How to Manage It, Measure It, and Profit from It (Prentice Hall, New Jersey: 2006).169. Ibid. 183. Steve Lohr, ‘G.E. Goes With What It Knows: Making170. Alina Tugend, ‘Too Many Choices: A Problem That Stuff’, The New York Times (4 December 2010), Can Paralyze’, The New York Times (26 February http://www.nytimes.com/2010/12/05/ 2010), http://www.nytimes.com/2010/02/27/ business/05ge.html?pagewanted=all your-money/27shortcuts.html 184. ‘Seems Awkward, Ignores the Rules, but Brilliant:171. Fabio Pammolli, Laura Magazzini and Massimo Meet the Maverick Job Candidate’, TimeBusiness Riccaboni, ‘The productivity crisis in (29 August 2012), http://business.time. pharmaceutical R&D’, Nature Reviews Drug com/2012/08/29/seems-awkward-ignores-the- Discovery, Vol. 10 (June 2011), pp. 428-438; rules-but-brilliant-meet-the-maverick-job- Steven M. Paul, Daniel S. 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The Pistoia Alliance, ‘What are the obstacles to Nature Reviews Drug Discovery, Vol. 10 (February innovation in the pharmaceutical industry?’, Drug 2011), p. 1; John Arrowsmith, ‘A decade of Discovery World (Summer 2011), http://www. change’, Nature Reviews Drug Discovery, Vol. 11 ddw-online.com/business/p149291-what-are-the- (January 2012), pp. 17-18. obstacles-to-innovation-in-the-pharmaceutical- industrysummer-11.html From vision to decision 47
  • Key national indicators Public health Projected population in Personal affluence (% of population with 2020 (millions) Economic indicators (% of adults with net worth, 2010) access, 2010) Per capita health US$ US$ GDP, 2011 spending, Under 1,000- 10,000- US$ Improved Total Aged 60+ (US$ bn) 2010, US$ US$1,000 10,000 100,000 100,000+ Clean water sanitation North America Canada 37.2 9.3 1,737 5,222 10.0 10.3 31.0 48.7 100 100 United States 337.1 75.6 15,094 8,362 3.5 23.8 36.5 36.2 99 100 EU-Big Five France 65.9 17.3 2,776 4,691 0.3 10.5 49.4 39.7 100 100 Germany 81.0 24.5 3,577 4,668 13.1 14.6 30.4 41.9 100 100 Italy 61.3 17.9 2,199 3,248 0.0 41.4 41.4 55.5 100 100 Spain 48.7 12.2 1,494 2,883 1.1 18.0 47.9 32.9 100 100 United Kingdom 65.8 16.1 2,418 3,503 0.3 12.2 40.9 46.6 100 100 BRIC economies Brazil 210.4 29.6 2,493 990 21.0 41.1 34.1 3.7 98 79 China 1,387.8 241.0 7,298 221 6.8 59.6 31.8 1.8 91 64 India 1,386.9 135.9 1,676 54 42.8 50.1 6.6 0.4 92 34 Russia 141.0 31.2 1,850 525 24.0 51.4 23.5 1.1 97 70 Fast followers Argentina 43.9 7.2 448 742 22.0 43.5 32.3 2.2 96+ 90 Egypt 94.8 9.6 236 123 18.1 54.1 26.7 1.1 99 95 Indonesia 262.6 28.8 846 77 24.8 53.0 20.3 2.0 82 54 Mexico 125.9 15.4 1,155 604 18.5 41.8 35.8 3.9 96 85 Pakistan 205.4 15.1 211 22 30.8 59.3 9.7 0.2 92 48 Poland 38.4 9.7 514 917 8.3 36.4 50.4 4.9 100 90+ Romania 21.0 5.0 190 428 17.8 50.0 31.1 1.2 84+ 72+ South Africa 52.6 5.1 408 649 24.1 42.7 29.6 3.6 91 77 Thailand 72.1 13.2 346 179 34.8 53.7 11.1 0.3 96 96 Turkey 80.8 9.8 778 678 13.8 38.6 43.7 3.9 100 90 Ukraine 43.0 10.0 165 234 42.5 53.4 4.0 0.1 98 N/A Venezuela 33.3 3.8 316 663 20.0 45.4 32.7 1.9 92+ 91+ Vietnam 96.4 12.0 123 83 34.8 55.1 9.9 0.2 95 76 Asia-Pacific Australia 25.2 5.6 1,488 4,775 0.3 9.8 31.8 58.2 100 100 Japan 124.8 42.7 5,869 4,065 0.0 6.2 42.7 51.1 100 100 Malaysia 33.0 3.7 279 368 10.7 38.3 46.8 4.3 100 96 New Zealand 4.8 1.1 162 3,279 5.0 22.5 38.7 33.9 100 100 Philippines 109.7 8.6 213 77 34.4 52.2 13.1 0.4 92 74 Saudi Arabia 33.6 2.4 576 680 11.7 37.7 46.1 4.4 N/A N/A South Korea 49.8 11.5 1,116 1,439 0.4 7.1 64.6 17.9 98 100 United Arab Emirates 9.2 0.4 360 1,450 0.1 9.8 52.8 37.3 100 98 Sources: United Nations Population Division, International Monetary Fund, World Bank, World Health Organisation, Credit Suisse Global Wealth Databook, UNICEF, Business Monitor International, PwC research48 Pharma 2020
  • Risk factors Impact of non-communicable diseases (% of population) (% of deaths) Market indicators Pharma Pharma Overweight Overweight sales at sales at Generics Generics or obese or obese constant constant market market males females exchange exchange share, 2011 share, 2020 Adult aged 15+ aged 15+ Resp. rates, 2011 rates, 2020 (% of total (% of totalsmokers (2010) (2010) All NCDs CVD Cancers diseases Diabetes (US$ bn) (US$ bn) sales) sales) 19.5 66.9 59.5 89 33 30 6 3 26.6 31.1 17.6 23.9 27.0 80.5 76.7 87 35 23 7 3 337.1 424.8 23.7 32.4 29.9 48.0 36.9 87 30 31 4 2 48.7 49.5 13.1 18.1 25.7 67.2 57.1 92 45 26 4 3 55.1 57.6 19.1 28.3 23.0 55.0 40.0 92 41 28 5 4 34.6 29.0 6.7 10.3 29.9 57.9 49.8 91 33 27 9 3 28.0 19.2 7.3 14.7 21.0 67.8 63.8 88 34 27 8 1 38.3 38.6 21.9 26.9 17.2 54.0 60.3 74 33 16 6 5 25.6 57.3 16.0 33.8 28.1 45.0 32.0 83 38 21 15 2 66.9 175.8 64.2 58.7 14.0 20.1 18.1 53 24 6 11 2 15.6 48.8 72.2 72.7 39.1 46.5 51.7 82 62 13 2 0 20.7 45.1 37.0 41.1 27.1 77.7 71.2 80 33 20 10 3 7.6 24.2 9.8 14.1 19.4 64.5 76.0 82 39 11 3 3 3.1 8.4 27.3 36.5 24.2 9.9 27.1 64 30 13 7 3 6.0 12.9 40.0 50.2 15.9 73.6 73.0 78 28 13 6 13 13.0 26.2 12.1 18.1 19.1 22.8 29.5 46 25 7 5 1 2.0 4.5 65.5 63.3 30.3 50.7 44.3 89 48 26 3 2 11.3 16.9 41.6 39.9 32.4 37.7 40.6 91 59 19 3 1 4.2 8.1 22.6 24.7 31.7 41.3 68.5 29 11 7 3 3 3.7 7.7 29.2 38.5 23.7 28.3 39.9 71 27 12 7 6 4.3 7.0 50.9 49 31.2 47.9 65.7 85 49 18 9 2 10.2 19.7 34.3 41.2 28.8 41.2 48.5 86 66 11 2 0 3.4 8.6 49.2 51.5 18.0 74.4 67.3 66 31 15 3 6 5.5 20.9 35.2 50.6 23.8 7.5 12.2 75 40 14 8 3 2.4 7.2 50.0 55.9 16.6 75.7 66.5 90 35 29 6 3 13.3 15.1 13.8 24.8 23.4 29.8 16.2 80 32 31 5 1 127.4 148.7 9.1 19.5 21.5 64.1 42.2 67 32 15 7 2 1.8 3.7 30.0 33.3 19.9 73.9 74.2 91 37 29 7 3 1.1 1.2 17.9 25.1 28.3 22.2 33.6 61 30 10 5 4 2.9 4.1 17.1 34.2 12.5 63.1 65.9 71 42 9 3 6 4.5 9.1 7.7 13.8 27.7 51.5 51.0 82 29 30 5 5 14.8 21.7 31.8 34.1 20.5 66.9 71.6 67 38 12 2 3 1.5 3.1 15.1 18.5 From vision to decision 49
  • Acknowledgements We would like to thank the many people who have helped us in producing this report. Our lead author Dr Steve Arlington (Partner, PwC UK) would like to thank Joseph D. Palo (President, JD Pharma LLC), Dr Nicholas Davies (Partner, PwC US), Dr Helen Kay (Director, European Communications Consultancy), Dr Sally Drayton (Global Pharmaceutical and Life Sciences Knowledge Manager, PwC UK), Ms Marina Bello Valcarce (Global Pharmaceutical and Life Sciences Marketing and Knowledge Management, PwC UK) and our PwC review team for their help. Also our thanks go to Ian Bremmer, Mary Cline, Larry Cristini, Nigel Greenhill and Scott Rosenstein of Eurasia Group for their input on healthcare policy in Europe and the growth markets. Additionally, we are deeply indebted to the following people for their insights: Dr Heather Ahlborn, Ph.D., Global Mr Ranga Iyer, Chairman CII (WR) Mr Tapan Ray, Director General, Solutions Director, Process Solutions, Taskforce on Sector Skill Development Organisation of Pharmaceutical Merck Millipore and Healthcare Consultant & Advisor, Producers of India India Health Progress Mr Graeme Bell, VP & Head of Finance Dr David Roblin, BSc, MBBS, U.S Market, Merck & Co., Inc. Dr Sally John, Ph.D., Executive Director FRCP, MFPM, Chief Medical Officer, Human Genetics, Pfizer Inc. Creabilis Ltd. Mr Brian Bertha, Chief Business Officer, Crescendo Bioscience, Inc. Dr Sneh Khemka, MBChB, Mr Yury Rozenman, Head of Marketing, Director of Healthcare Development, Global Sectors, BT Global Services Dr Terrence Blaschke, M.D., Professor Bupa International Emeritus, Stanford University Dr Steven Ryder, M.D. FACP, Mr James Lennertz, Vice President and President, Astellas Pharma Global Prof. Sir Alasdair Breckenridge, CBE, General Manager, BioMarin Europe, Ltd Development, Inc. Chairman, Medicines and Healthcare Products Regulatory Agency Mr Earle Martin, Founder and Partner, Dr David Savello, Ph.D., SVP Drug NDA Partners LLC Development, XenoPort Inc. Dr Neill Carman, Ph.D, R&D Director Continuous Improvement, AstraZeneca Dr Clare McGrath, Ph.D, Mr Ranjit Shahani, President of the Plc Global payer evidence and HTA Policy, Organisation of Pharmaceutical AstraZeneca Plc Producers of India and Country Dr Thomas Colett, Ph.D., President President of Novartis Group of and CEO and Director, Meditrina Dr Marivi Mendizabal, BPharm, Companies in India Pharmaceuticals, Inc. MSc, Ph.D, Global Head of Discovery, GE Healthcare, Medical Diagnostics Mr A. Vaidheesh, Managing Director, Dr Alex Cross, Ph.D., Principal, Johnson & Johnson Medical India NDA Partners LLC Prof. Dr Leo Neels, Algemeen Directeur – Directeur général, pharma.be vzw/asbl Dr Jan Van Emelen. M.D, Director Dr Charles Cutler, M.D., Chief Medical Innovation, Mutualités Libres Officer, Complex Care Clinical Programs, Mr Manoj Niranjan, Associate Director (Onafhankelijke Ziekenfondsen) Magellan Health Services Commercial Excellence, Abbott India Ms Jo Walton, European Dr Ajit Dangi, Ph.D., President & CEO, Dr Carl Peck, M.D., Founder, Manager, Pharmaceuticals Equity Research, Danssen Consulting and Chairman, NDA Partners LLC Credit Suisse Group AG Mr James Dishong, Business Operations Mr Matt Portch, Vice-President Dr Cory Williams, Senior Director, Leader, Eli Lilly and Company of Commercial Model Innovation, Strategy, Pfizer Inc. Pfizer Inc. Mr Aaron Graff, President and COO, Ferring Pharmaceuticals Inc. Mr Vinay Ranade, Director, Reliance Life Sciences Mr Graham Higson, Managing Director, NDA Advisory Services Finally, we would like to thank our colleagues in PwC’s Global Pharmaceutical and Life Sciences teams who helped us develop this report.50 Pharma 2020
  • Territory contactsArgentina Finland Lithuania SlovakiaDiego Niebuhr Janne Rajalahti Kristina Krisciunaite Rastislava Krajcovicova[54] 11 4850 4705 [358] 3 3138 8016 [370] 5 239 2391 [421] 2 593 50616Austria France Luxembourg South AfricaGerhard Prachner Anne-Christine Marie Laurent Probst Denis von Hoesslin43 1 501 881 800 [33] 1 56 57 13 42 [352] 0 494 848 2522 [27] 117 974 285Australia Germany Malaysia SpainJohn Cannings Michael Burkhart Mei Lin Fung Rafael Rodríguez Alonso[61] 2 826 66410 [49] 69 9585 1268 [60] 3217 31505 [34] 91 568 4287Belgium Greece Mexico SwedenThierry Vanwelkenhuyzen Nick Papadopoulos Jose Alarcon Eva Blom[32] 2 710 7422 [30] 210 6874740 [52] 55 5263 6028 [46] 8 5553 3388Bolivia Hungary Netherlands SwitzerlandCesar Lora Eva Barsi Arwin van der Linden Clive Bellingham[59] 13 336 4050 [36] 1 461 9169 [31] 20 5684712 [41] 58 792 2822Bulgaria India Norway Peter KartscherIrina Tsvetkova Sujay Shetty Fredrik Melle [41] 58 792 5630[359] 2 9355 126 [91] 22 6669 1305 [47] 95 26 0013 Markus PrinzenBrazil Indonesia Peru [41] 58 792 5310Eliane Kihara Ay Tjhin Phan Felix Horna Taiwan[55] 11 3674 2455 [62] 21 5212901 [5] 11 211 6500 Alan LinCanada Ireland Miguel Puga [886] 2 2729 6702Prabh Singh Jean Delaney [5] 11 211 6500 Thailand[1] 905 897 4519 [353] 1 792 6280 Zoya Vassilieva PhilippinesChile Israel Che Javier [66] 2 344 1115Ricardo Arrano Claudio Yarza [63] 2 459 3010 Turkey[55] 31 3269 1551 [972] 3 795 4 590 Ediz Gunsel PolandChina, Republic of Arik Reizner Mariusz Ignatowicz [90] 212 326 61 60Mark Gilbraith [972] (0) 3 795 4 537 [48] 22 523 4795 United Kingdom[86] 21 2323 2898 Andrew Packman Italy PortugalColombia Massimo Dal Lago Ana Lopes [44] 1895 522104Eliana Bernal [39] 045 8002561 [351] 213 599 159 United States[57] 1 634 0527 Michael Swanick Japan RomaniaCzech Republic Eimei Shu Mihaela Mitroi [1] 267 330 6060Radmila Fortova [81] 90 7901 5227 [40] 21 202 8717 Uruguay[420] 2 5115 2521 Richard Moreira Korea RussiaDenmark Hyung-Do Choi Alina Lavrentieva [598] 02 916 0820Torben TOJ Jensen [82] 2 709 0253 [7] 495 967 6250 Venezuela[45] 3 945 9243 Luis Freites Latvia SingaporeEcuador Vita Sakne Ronald JW Ling [58] 212 700 6966Carlos Cruz [371] 6709 4425 [65] 6236 4021[593] 2 2562 288 130 From vision to decision 51
  • For further information, please contact Global United States Europe Michael Swanick Douglas Strang Jo Pisani Partner, Global Pharmaceutical and Life Partner, US Pharmaceutical and Life Partner, Pharmaceutical and Life Sciences Industry Leader Sciences Advisory Services co-Leader Sciences, Strategy PwC US PwC US PwC UK [1] 267 330 6060 [1] 267 330 3045 [44] 20 7804 3744 michael.f.swanick@us.pwc.com douglas.s.strang@us.pwc.com jo.pisani@uk.pwc.com Dr Steve Arlington Michael Goff Sandy Johnston Partner, Global Pharmaceutical and Life Partner, US Pharmaceutical and Life Partner, European Pharmaceutical and Sciences Advisory Services Leader Sciences Advisory Services co-Leader Life Sciences Advisory Services PwC UK PwC US PwC UK [44] 20 7804 3997 [1] 203 219 7722 [44] 20 7213 1952 steve.arlington@uk.pwc.com mike.goff@us.pwc.com sandy.johnston@uk.pwc.com Simon Friend Dr Nicholas Davies Dr Martin Schloh Partner, Global Pharmaceutical and Life Partner, US Pharmaceutical and Life Partner, Pharmaceutical and Life Sciences Assurance Services Leader Sciences Advisory Services Sciences Advisory Services PwC UK PwC US PwC Germany [44] 20 7213 4875 [1] 860 326 8187 [49] 89 5790 5102 simon.d.friend@uk.pwc.com nicholas.davies@us.pwc.com martin.schloh@de.pwc.com Anthony Farino Jim Connolly Clive Bellingham Partner, Pharmaceutical and Life Partner, US Pharmaceutical and Life Partner, Pharmaceutical and Life Sciences Growth Markets Leader Sciences Assurance Services Leader Sciences Advisory Services PwC US PwC US PwC Switzerland [1] 312 298 2631 [1] 617 530 6213 [41] 58 792 28 22 anthony.l.farino@us.pwc.com james.m.connolly@us.pwc.com clive.bellingham@ch.pwc.com Asia Pacific Middle East Marketing John Cannings Sally Jeffery Attila Karacsony Partner, AsiaPac and Australia Partner, Healthcare Advisory Services, Director, US Pharmaceutical and Life Pharmaceutical and Life Sciences Middle East Sciences Marketing Industry Leader PwC United Arab Emirates PwC US PwC Australia [971] 4 304 3154 [1] 973 236 5640 [61] 2 826 66410 sally.jeffery@ae.pwc.com attila.karacsony@us.pwc.com john.cannings@au.pwc.com Marina Bello Valcarce Mark Gilbraith Global Pharmaceutical and Life Sciences Partner, Republic of China Marketing and Knowledge Management Pharmaceuticals and Life Sciences PwC UK Industry Leader [44] 20 7212 8642 PwC China marina.bello.valcarce@uk.pwc.com [86] 21 2323 2898 mark.gilbraith@cn.pwc.com Sujay Shetty Executive Director, India Pharmaceutical & Life Sciences Industry Leader PwC India [91] 22 6669 1305 sujay.shetty@in.pwc.com52 Pharma 2020
  • Previous publications in the series Pharmaceuticals Published in June 2007, this paper Pharmaceuticals and Life Sciences Published in February 2009, this paper highlights a number of issues that will discusses the key forces reshaping the have a major bearing on the industry pharmaceutical marketplace, including Pharma 2020: The vision by 2020. The publication outlines the Pharma 2020: Marketing the future the growing power of healthcare payers, Which path will you take?* changes we believe will best help Which path will you take? providers and patients, and the changes pharmaceutical companies realise the required to create a marketing and sales potential the future holds to enhance the model that is fit for the 21st century. These value they provide to shareholders and changes will enable the industry to market society alike. and sell its products more cost-effectively, to create new opportunities and to generate greater customer loyalty across the healthcare spectrum. *connectedthinking pwc Pharma 2020: The vision # Pharmaceuticals and Life Sciences This report, published in June 2008, Pharmaceuticals and Life Sciences The fifth report in our series, published explores opportunities to improve the in December 2009, focuses on the R&D process. It proposes that new opportunities and challenges from a tax Pharma 2020: Virtual R&D technologies will enable the adoption Pharma 2020: Taxing times ahead perspective. It discusses how the political, Which path will you take? of virtual R&D; and by operating in Which path will you take? economic, scientific and social trends a more connected world the industry, currently shaping the commercial in collaboration with researchers, environment, together with the governments, healthcare payers and development of new, more collaborative providers, can address the changing business models, will exert increasing needs of society more effectively. pressure on effective tax rates within the industry. It also shows how companies can adapt their tax strategies to support the provision of outcomes-based healthcare Pharma 2020: Virtual R&D 1 and remain competitive. Pharmaceuticals and Life Sciences Fourth in the Pharma 2020 series and In our sixth release of the series, published published in April 2009, this report in February 2011, PwC discusses how highlights how Pharma’s fully integrated pharma companies must develop different business models may not be the best supply chain models, learn to use supply Pharma 2020: Challenging business models Which path will you take? option for the pharma industry in 2020; chains as a market differentiator and more creative collaboration models revenue generator, and recognise how may be more attractive. This paper information will drive the downstream also evaluates the advantages and flow of products and services. disadvantages of the alternative business models and how each stands up against the challenges facing the industry.All these publications are available to download at: www.pwc.com/pharma2020This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon theinformation contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy orcompleteness of the information contained in this publication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or dutyof care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.© 2012 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.Please see www.pwc.com/structure for further details.Design & Media – The Studio 21334 (11/12)
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